Question

Movers Company manufactures sneakers. Production of their new sneaker for the coming three months is budgeted as follows:

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August	28,000
September	50,000
October	33,000

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Each sneaker requires 2.5 hours of direct labor time. Direct labor wages average $16 per hour. Monthly variable overhead averages $10 per direct labor hour plus fixed overhead of $4,500. What is the total overhead budgeted for the month of September?

	a.	$6,800,000
	b.	$1,254,500
	c.	$142,100
	d.	$460,000
	e.	$362,100

Answer 1

Expected production	50,000
Labor time required per unit	2.50
Total labor hours required (50,000*2.5)	125,000
Variable overhead ($10*125,000)	1,250,000
Fixed overhead	$        4,500
Total manufacturing overhead ($1,250,000+$4,500)	1,254,500

Answer is B

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