Glaston Company manufactures a single product using a JIT inventory system. The

Question

Glaston Company manufactures a single product using a JIT inventory system. The production budget indicates that the number of units expected to be produced are 193,000 in October, 201,500 in November, and 198,000 in December. Glaston assigns variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals $140,000 per month. Compute the total budgeted overhead that would appear on the factory overhead budget for month of October.

A. 343,000

B. 150,000

C. 144,750

D. 301,125

E. 294,750

Explanation / Answer

Just In Time (JIT) is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

When Companies use Just in Time (JIT) manufacturing and inventory control system, they purchase materials and produce units only as needed to meet actual customers demand. In just in time manufacturing system inventories are reduced to the minimum and in some cases are zero. JIT approach can be used in both manufacturing and merchandising companies. It has the most profound effects, however, on the operations of manufacturing companies which maintain three class of inventories-raw material, Work in process, andfinished goods.

October November December Fixed overhead          140,000          140,000          140,000 Number of units          193,000          201,500          198,000 Variable overhead          144,750 Total budgeted overhead          294,750

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