Reference no: EM131759267

Cornerstone Exercise 8.5 (Algorithmic)

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	59,000
Indirect labor	179,000
Supervision	76,000
Depreciation on equipment	50,000
Depreciation on the buliding	42,000
Rental of special equipment	12,500
Electricity (for lighting, heating, and air conditioning)	28,200
Telephone	4,700
Landscaping service	1,100
Other overhead	52,000

In the coming year, Johnston expects to powder coat 150,000 units. Each unit takes 1.5 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.