The Total Factory Overhead for Big Light Company Is Budgeted

question 63

Essay

The total factory overhead for Big Light Company is budgeted for the year at $807,500. Big Light manufactures two different products: night lights and desk lamps. Night lights are budgeted for 60,000 units. Each night light requires 1/2 hour of direct labor. Desk lamps are budgeted for 80,000 units. Each desk lamp requires 2 hours of direct labor. Determine (a) the total number of budgeted direct labor hours for the year, (b) the single plantwide factory overhead rate using direct labor hours as the allocation base, and (c) the factory overhead allocated per unit for each product using the single plantwide factory overhead rate determined in (b).

---

Definitions:

Direct Labor

The wages and benefits paid for the labor directly involved in the production of goods or services.

Budgeting

The method of devising a strategy for allocating your finances, detailing an entity's economic and functional objectives.

Activity Variance

The difference between planned activity levels and actual activity levels in budgeting and accounting.

Selling And Administrative Expenses

Costs related to selling products and managing the business, not directly tied to production.