QS 22-9A Manufacturing: Factory overhead budget LO P3 Forrest Company manufactures watches and has a JIT policy that ending inventory must equal 10% of the next month’s sales. It estimates that October’s actual ending inventory will consist of 40,000 watches. November and December sales are estimated to be 400,000 and 350,000 watches, respectively. Forrest Company assigns variable overhead at the rate of $1.50 per unit of production. Fixed overhead equals $4,600,000 per month. Prepare a factory overhead budget for November. (Round overhead rate per unit to 2 decimal places.)

QS 22-9A Manufacturing: Factory overhead budget LO P3

Forrest Company manufactures watches and has a JIT policy that ending inventory must equal 10% of the next month’s sales. It estimates that October’s actual ending inventory will consist of 40,000 watches. November and December sales are estimated to be 400,000 and 350,000 watches, respectively. Forrest Company assigns variable overhead at the rate of $1.50 per unit of production. Fixed overhead equals $4,600,000 per month.

Prepare a factory overhead budget for November. (Round overhead rate per unit to 2 decimal places.)

Explanation:      Next month's budgeted sales 350,000     Ratio of inventory to future sales ×      10 %      Budgeted ending inventory 35,000