Exercise 07-7 Manufacturing: Direct labor and factory overhead budgets LO P1 Addison Co. budgets production of 2,850 units during the second quarter. Other information is as follows: Direct labor Each finished unit requires 6 direct labor hours, at a cost of $9 per hour. Variable overhead Applied at the rate of $11 per direct labor hour. Fixed overhead Budgeted at $640,000 per quarter. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget.

See below

Explanation:

1. Total Direct labor

Addison Co.

Direct labor budget for second quarter

Budgeted production units 2,850

Direct labor hour per one unit 6

Total direct labor hours needed 17,100

Cost per one direct labor $9

Total direct labor $153,900

2. Total factory overhead budget

Addison Co. Factory overhead for second quarter

Total direct labor hours needed 17,100

Variable rate per direct labor hour $11

Budgeted variable overhead $188,100

Budgeted fixed overhead $640,000

Total factory overhead $828,100

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