Atlanta Company is preparing its manufacturing overhead budget for 2012. Relevan

Question

Atlanta Company is preparing its manufacturing overhead budget for 2012. Relevant data consist of the following.

Units to be produced (by quarters): 10,700, 12,500, 14,600, 16,200.
Direct labor: Time is 1.6 hours per unit.
Variable overhead costs per direct labor hour: Indirect materials $0.81; indirect labor $1.30; and maintenance $0.65.
Fixed overhead costs per quarter: Supervisory salaries $37,880; depreciation $18,140; and maintenance $13,130.

Having trouble understanding the Variable costs.

Thank you.

Explanation / Answer

labour cost per hour is 0.81 + 1.3+ 0.65 = $2.76

Hence variable cost per unit is 1.6 * 2.76 = $4.416

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