Problem 1: Part A: A company has variable overhead of $3 per unit and fixed over

Question

Problem 1:

Part A:

A company has variable overhead of $3 per unit and fixed overhead of $108,000 per quarter. If the company plans to produce 72,000 units in the quarter, what is the TOTAL amount of overhead that should be budgeted for the quarter?

Part B:

Merchandise purchases are budgeted for the 1st Quarter at $275,000 and 2nd Quarter $400,000. All purchases are made on credit and 65% is paid in the quarter of the purchase and the remaining 35% is paid in the quarter after the purchase. December 31 Accounts Payable of last year is $100,000 and will be paid in 1st quarter. Determine the amount to be paid for purchases in 1st Quarter.

Explanation / Answer

Part A :

Total amount of overhead budgeted = (72000*3+108000) = 324000

Part B:

Determine amount to be paid for purchased in 1st quarter :

Amount paid in 1st quarter = (275000*65%)+100000 = 278750

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