Question

T Company expects to incur the following per unit costs for 1,000 units of production: Direct materials of 4 pounds per unit at $3 per pound AND direct labor of ¼ hour at $24 per hour AND variable overhead at 75 percent of direct labor costs AND fixed overhead of $3,000. What is the total amount of overhead to include in the overhead budget?
A. $13,500.
B. $4,500.
C. $3,000.
D. $11,250.
E. $7,500.

Answer 1

Answer:

Total overhead =  = $7,500

so here correct option is E. $7,500

Explanation:

given data

production = 1,000 units

direct labor = ¼ hour @ $24 per hour

variable overhead = 75 % of direct labor

fixed overhead = $3,000

to find out

total amount of overhead

solution

we first find Direct labor that is

Direct labor = ¼ × 24

Direct labor = $6

so

Total overhead will be here

Total overhead = Variable overhead + Fixed overhead     .................1

now put here value we get

Total overhead = ($6 ×  75% ) × 1,000 + $3,000

so

Total overhead =  = $7,500

so here correct option is E. $7,500