The Splash makes large fiberglass swimming pools and uses machine hours and direct labor hours to apply overhead in the Production and Installation departments, respectively. The monthly cost formula for overhead in Production is y = $7,950 + $4.05 MH; the overhead cost formula in Installation is y = $6,150 + $14.25 DLH. These formulas are valid for a relevant range of activity up to 3,600 machine hours in Production and 5,400 direct labor hours in Installation. Each pool is estimated to require 15 machine hours in Production and 36 hours of direct labor in Installation. Expected capacity for the year is 72 pools. c. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming that expected production is 5 pools.
The Splash makes large fiberglass swimming pools and uses machine hours and direct labor hours to apply
These formulas are valid for a relevant range of activity up to 3,600 machine hours in Production and 5,400 direct labor hours in Installation.
Each pool is estimated to require 15 machine hours in Production and 36 hours of direct labor in Installation. Expected capacity for the year is 72 pools.
c. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming that expected production is 5 pools.
| Production costs: | $ | |
| Variable | $ | |
| Fixed (monthly amount) | $ | |
| Total production overhead | $ | |
| Installation costs: | ||
| Variable | $ | |
| Fixed (monthly amount) | $ | |
| Total installation | $ | |
| Total | $ |
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