Question

Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data:Budgeted output units: 28,475 units Budgeted machine-hours: 17,085 hoursBudgeted variable manufacturing overhead costs for 28,475 units: $358,785 Actual output units produced: 32,475 units Actual machine-hours used: 15,000 hoursActual variable manufacturing overhead costs: $384,060 What is the flexible-budget amount for variable manufacturing overhead?

Answer 1

$409185

Step-by-step explanation:

Given: Budgeted output units: 28,475 units

Budgeted machine-hours: 17,085 hours

Budgeted variable manufacturing overhead costs for 28,475 units: $358,785

Actual output units produced: 32,475 units

Actual machine-hours used: 15,000 hours

Actual variable manufacturing overhead costs: $384,060.

First, we will find Budgeted machine hour per unit produced.

Budgeted machine hour per unit produced=
`(Budgeted\ machine\ hour)/(Budgeted\ units)`

⇒
`Budgeted machine hour per unit produced= 17085/ 28475= 0.6`

∴Budgeted machine hour per unit produced= 0.6

Budgeted machine hours allowed for 32475 units=
`32475* 0.6= 19485`

Budgeted variable overhead rate per machine hour=
`\textrm {Budgeted variable manufacturing overhead costs}/ Budgeted\ machine\ hours`

Budgeted variable overhead rate per machine hour=
`358785/ 17085= \$ 21`

Now, lets find out flexible budget amount.

Flexible budget amount=
`\textrm{Budgeted machine hours allowed}* \textrm{Budgeted variable overhead rate}`

Flexible budget amount=
`19485* \$ 21= \$ 409185`

∴Flexible budget amount for variable manufacturing overhead= $409185