Solved: Overhead Budget Johnston Company cleans and

applies powder coat paint

Overhead Budget Johnston Company cleans and applies powder coat paint

Overhead Budget 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 the 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.

Required:

1. Calculate the number of direct labor hours Johnston must budget for the coming year.
Calculate 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

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 overhead, 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).

Overhead Budget Johnston Company cleans and applies powder coat paint

ANSWER
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