[The following information applies to the questions displayed below.] Black Diam

Question

[The following 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 predicts that 6,000 skis and 7,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 160,000 skis will be sold during the next (third) quarter. A set of two skis sells for $400. Management wants to end the third quarter with 4,500 skis and 5,000 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $25 per pound. Each ski requires 0.5 hours of direct labor at $30 per hour. Variable overhead is applied at the rate of $18 per direct labor hour. The company budgets fixed overhead of $1,792,000 for the quarter.

4. Prepare the factory overhead budget for the third quarter.

Explanation / Answer

BLACK DIAMOND COMPANY Factory Overhead Budget Third Quarter Total labor hours needed (160000*0.5) 80000 Variable overhead rate per hour $18 Total variable overhead (80000*18) 1440000 Fixed factory overhead 1792000 Total factory overhead 3232000

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