Page 259 - P1 Integrated Workbook STUDENT 2018

Answers

Example 4

ABC has determined that their production budget for product X next year will
be 10,500 units and this will require 15,750 hours of labour time. ABC have
estimated that their variable overheads will be $2 per labour hour and fixed
overheads will be $50,000 for the year.

Calculate the budgeted overhead cost.

Solution

Variable overheads= labour hours × standard rate per labour hour

Variable overheads = 15,750 hours × $2/hour = $31,500

Fixed overheads = $50,000 (provided above)

Total overheads budget = variable overheads + fixed overheads

Total overheads budget = $31,500 + $50,000 = $81,500

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