Question

Crane Company prepared a fixed budget of 40000 direct labor hours, with estimated overhead costs of $200000 for variable overhead and $90000 for fixed overhead. Crane then prepared a flexible budget at 37000 labor hours. How much is total overhead costs at this level of activity?

Answer 1

$275,000

Step-by-step explanation:

The computation of the total overhead cost is shown below:

= Variable overhead cost + fixed overhead cost

where,

Variable overhead cost equals to

= (Total estimated overhead cost ÷ fixed direct labor hour hours) × flexible budget labor hours

= ($200,000 ÷ 40,000) × 37,000

= $185,000

And, the fixed overhead is $90,000

ow put these values to the above formula

So, the value would be equal to

= $185,000 + $90,000

= $275,000