Babcock Builders is a well-regarded construction company that serves as a general contractor for both residential and commercial construction…
Babcock Builders is a well-regarded construction company that serves as a general contractor for both residential and commercial construction projects. One of the company’s signature features is its cabinetry. The company’s founder and president, Bill Babcock, began manufacturing cabinets six years ago in an effort to capitalize on the company’s reputation and the skills of its craftsmen. The company’s production budget for the first seven months of the year is as follows:
Month
Units
January
10,000
February
17,000
March
13,000
April
18,500
May
22,100
June
24,300
July
26,200
Babcock’s most popular cabinet is a small cherry wood cabinet typically used in bathrooms. Each completed unit requires 3.5 hours of direct labor, and the skilled labor costs an average of $25 per hour. The company applies overhead at the rate of $3 per direct labor hour.
A. Prepare a direct labor budget for January through June.
B. Prepare a manufacturing overhead budget for the same period.
