Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in thecoming year. Supplies $216,000Gas 50,000Indirect labor 176,000Supervision 73,500Depreciation on equipment 47,000Depreciation on the building 40,000Rental of special equipment 11,000Electricity (for lighting, heating, and air conditioning) 28,900Telephone 4,300Landscaping service 1,200Other overhead 50,000 In the coming year, Johnston expects to powder coat 120,000 units. Each unit takes 1.3direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens—all units pass through the drying ovens after powder coat paint is applied) tend to vary with thenumber of units produced. All other overhead categories are considered to be fixed. (Round all overhead rates to the nearest cent.)Required: 1. Calculate the number of direct labor hours Johnston must budget for the coming year. Cal-culate the variable overhead rate. Calculate the total fixed overhead for the coming year. 2. Prepare an overhead budget for Johnston for the coming year. Show the total variable over-head, total fixed overhead, and total overhead. Calculate the fixed overhead rate and the total overhead rate (rounded to the nearest cent). 3. What if Johnston had expected to make 118,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours and prepare a new overheadbudget. Calculate the fixed overhead rate and the total overhead rate (rounded to thenearest cent).
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various
coming year.
Supplies $216,000
Gas 50,000
Indirect labor 176,000
Supervision 73,500
Depreciation on equipment 47,000
Depreciation on the building 40,000
Rental of special equipment 11,000
Electricity (for lighting, heating, and air conditioning) 28,900
Telephone 4,300
Landscaping service 1,200
Other overhead 50,000
In the coming year, Johnston expects to powder coat 120,000 units. Each unit takes 1.3
direct labor hours. Johnston has found that supplies and gas (used to run the drying ovens—all units pass through the drying ovens after powder coat paint is applied) tend to vary with the
number of units produced. All other overhead categories are considered to be fixed. (Round all overhead rates to the nearest cent.)
Required:
1. Calculate the number of direct labor hours Johnston must budget for the coming year. Cal-
culate the variable overhead rate. Calculate the total fixed overhead for the coming year.
2. Prepare an overhead budget for Johnston for the coming year. Show the total variable over-
head, total fixed overhead, and total overhead. Calculate the fixed overhead rate and the
total overhead rate (rounded to the nearest cent).
3. What if Johnston had expected to make 118,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours and prepare a new overhead
budget. Calculate the fixed overhead rate and the total overhead rate (rounded to the
nearest cent).
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