Teller Co. is planning to sell 900 boxes of ceramic tile, with production estima

Question

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month?

Explanation / Answer

Direct labor cost = 870 boxes *.25 Hours * 12 = $ 2610

Mnaufacturing overhead Budgeted = 2610 *110% = $ 2871

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