Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year. Supplies $225,000 Gas 60,000 Indirect labor 178,000 Supervision 76,500 Depreciation on equipment 53,000 Depreciation on the buliding 50,000 Rental of special equipment 10,500 Electricity (for lighting, heating, and air conditioning) 27,100 Telephone 4,100 Landscaping service 1,900 Other overhead 55,000 In the coming year, Johnston expects to powder coat 170,000 units. Each unit takes 1.3 direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens-all units pass through the drying ovens after powder coat paint is applied) tend to vary with the number of units produced. All other overhead categories are considered to be fixed.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question
100%

Overhead Budget

Overhead Budget
Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year.
Supplies
$225,000
Gas
60,000
Indirect labor
178,000
Supervision
76,500
Depreciation on equipment
53,000
Depreciation on the buliding
50,000
Rental of special equipment
10,500
Electricity (for lighting, heating, and air conditioning)
27,100
Telephone
4,100
Landscaping service
1,900
Other overhead
55,000
In the coming year, Johnston expects to powder coat 170,000 units. Each unit takes 1.3 direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens-all units pass through the drying ovens after powder coat paint is
applied) tend to vary with the number of units produced. All other overhead categories are considered to be fixed.
Required:
1. Calculate the number of direct labor hours Johnston must budget for the coming year. Calculate the variable overhead rate. Calculate the total fixed overhead for the coming year. When required, round your answers to the nearest cent and use
the rounded answers in subsequent requirements.
Direct labor hours
Variable overhead rate
per direct labor hour
Total fixed overhead
Transcribed Image Text:Overhead Budget Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year. Supplies $225,000 Gas 60,000 Indirect labor 178,000 Supervision 76,500 Depreciation on equipment 53,000 Depreciation on the buliding 50,000 Rental of special equipment 10,500 Electricity (for lighting, heating, and air conditioning) 27,100 Telephone 4,100 Landscaping service 1,900 Other overhead 55,000 In the coming year, Johnston expects to powder coat 170,000 units. Each unit takes 1.3 direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens-all units pass through the drying ovens after powder coat paint is applied) tend to vary with the number of units produced. All other overhead categories are considered to be fixed. Required: 1. Calculate the number of direct labor hours Johnston must budget for the coming year. Calculate the variable overhead rate. Calculate the total fixed overhead for the coming year. When required, round your answers to the nearest cent and use the rounded answers in subsequent requirements. Direct labor hours Variable overhead rate per direct labor hour Total fixed overhead
2. Prepare an overhead budget for Johnston for the coming year. Show the total variable overhead, total fixed overhead, and total overhead. When required, round your answers to the nearest cent.
Johnston Company
Overhead Budget
For the Coming Year
Budgeted direct labor hours
Variable overhead rate
Budgeted variable overhead
Budgeted fixed overhead
Total budgeted overhead
Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent.
Fixed overhead rate
per direct labor hour
Total overhead rate
per direct labor hour
3. What if Johnston had expected to make 168,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours.
Prepare a new overhead budget. If required, round your answers to the nearest cent.
Johnston Company
New Overhead Budget
For the Coming Year
Budgeted direct labor hours
Variable overhead rate
Budgeted variable overhead
Budgeted fixed overhead
Total budgeted overhead
Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent.
Fixed overhead rate
per direct labor hour
Total overhead rate
per direct labor hour
Transcribed Image Text:2. Prepare an overhead budget for Johnston for the coming year. Show the total variable overhead, total fixed overhead, and total overhead. When required, round your answers to the nearest cent. Johnston Company Overhead Budget For the Coming Year Budgeted direct labor hours Variable overhead rate Budgeted variable overhead Budgeted fixed overhead Total budgeted overhead Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent. Fixed overhead rate per direct labor hour Total overhead rate per direct labor hour 3. What if Johnston had expected to make 168,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours. Prepare a new overhead budget. If required, round your answers to the nearest cent. Johnston Company New Overhead Budget For the Coming Year Budgeted direct labor hours Variable overhead rate Budgeted variable overhead Budgeted fixed overhead Total budgeted overhead Calculate the fixed overhead rate and the total overhead rate. If required, round your answers to the nearest cent. Fixed overhead rate per direct labor hour Total overhead rate per direct labor hour
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education