Miami solar budgets production of 5,300 solar panels for August. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Variable factory overhead is budgeted to be 70% of direct labor cost, and fixed factory overhead is $180,000 per month.
Required:
a. Prepare a factory overhead budget for August.

The total factory overhead budget =$407,440

Explanation:

The total factory overhead budget is the addition of the variable overhead and fixed production overheads

This is done as follows:

Direct labour cost budgeted

= 4hours × 5,300 × $16

=  $339,200

Variable overhead budget

= 70% of Direct labour cost

= 70% ×  $339,200

=  $237,440

Fixed production Overhead = $170,000

The total factory overhead budget

=$237,440  +$170,000

= $407,440

The total factory overhead budget =$407,440

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