The total factory overhead for Ospina Company is budgeted for the year at $1,704
ID: 2387384 • Letter: T
Question
The total factory overhead for Ospina Company is budgeted for the year at $1,704,000 and divided into two departments: Fabrication, $1,344,000 and Assembly, $360,000. Morris manufactures two office furniture products: credenzas and desks. Each credenza requires four direct labor hours in Fabrication and two direct labor hours in Assembly. Each desk requires three direct labor hours in Fabrication and two direct labor hours in Assembly. Each product is budgeted for 8,000 units of production for the year.
If required, round all per unit answers to nearest whole cent.
a. Determine the total number of budgeted direct labor hours for the year in each department.
Explanation / Answer
We're trying to produce 8,000 units of each type of product. (8,000 Credenzas, 8,000 Desks, 16,000 total units) This type of problem is best to do one product at a time. Let's start with the Credenzas 1. Fabrication Department - 4 hours per Credenza for 8,000 units = 32,000 hours 2. Assembly Department - 2 hours per Credenza for 8,000 units = 16,000 hours Total = 48,000 Credenza DL hours Next is the Desk product 1. Fabrication Department - 3 hours per Desk for 8,000 units = 24,000 hours 2. Assembly Department - 2 hours per Desk for 8,000 units = 16,000 Total = 40,000 Desk DL hours Grand total 48,000 (Credenza hours) + 40,000 (Desk hours) = 88,000 Budgeted direct labor hours for the year. *As with most cost accounting problems, go slowly and logically. Practice makes perfect!
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