4 The folowing information applies to the questions displaye

4 The folowing information applies to the questions displayed below Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company\'s management pr edicts that 5,800 skis and 6,800 pounds of carbon fiber will be in inventory on June 30 of the current year and that 158,00 0 skis will be sold during the next (third) quarter. A set of two skis sells for $380. Management wants to end the third quart er with 4,300 skis and 4,800 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $23 per pound. Each ski requires 0.5 hours of direct labor at $28 per hour. Variable overhead is applied at the rate of $16 per direct labor hour The company budgets fixed overhead of $1,790,000 for the quarter. 20 points 4. Prepare the factory overhead budget for the third quarter Factory Overhead Budget References

Solution

First find units to be manufactured

Units to be manufactured = budget ending inventory + budgeted unit sales for quarter - Budgeted beginning inventory = 4300+158000-5800 = 156500 skiis

Total labor hours needed = units to be manufactured * direct labor hour per skii = 156500 * 0.5 = 78250 direct labor hours

Factory overhead budget

Total labor hours needed	78250
Variable overhead rate per DL hour	16
Budgeted variable overhead	1252000
Budgeted fixed overhead	1790000
Budgeted total overhead	3042000