Question

Shane industries prepared a fixed budget of 60,000 direct labor hours, with estimated overhead costs of $300,000 for variable overhead and $90,000 for fixed overhead. shane then prepared a flexible budget at 57,000 labor hours. how much is total overhead costs at this level of activity?

Answer 1

Total overhead
((300,000÷60,000)×57,000)+90,000
=375,000

Answer 2

Total overhead = $375,000

Step-by-step explanation:

60,000 direct labor hours

$300,000 variable overhead

variable overhead per direct labor = $300,000 / 60,000 = $5 per hour

if the number of direct labor hours is reduced to 57,000, then variable overhead = 57,000 x $5 = $285,000

total overhead = variable overhead + fixed overhead = $285,000 + $90,000 = $375,000