Answer:
The correct answer is $300,000.
Step-by-step explanation:
To prepare a flexible budget, we need to separate the manufacturing overhead costs into their variable and fixed components.
Variable manufacturing overhead costs are those that vary with the level of activity (machine hours), while fixed manufacturing overhead costs remain constant regardless of the activity level.
Given:
Planned activity level (machine hours) = 50,000
Variable manufacturing overhead costs:
Indirect materials = $90,000
Indirect labor = $120,000
Factory supplies = $15,000
Fixed manufacturing overhead costs:
Depreciation = $37,500
Taxes = $7,500
Supervision = $30,000
To calculate the flexible budget at the 50,000 machine hours level of activity, we use the formula:
Flexible Budget = Fixed Manufacturing Overhead Costs + (Variable Manufacturing Overhead Rate per Machine Hour * Actual Machine Hours)
Calculate the Variable Manufacturing Overhead Rate per Machine Hour:
Variable Manufacturing Overhead Rate per Machine Hour =
(Variable Manufacturing Overhead Costs) / (Planned activity level in machine hours)
Variable Manufacturing Overhead Rate per Machine Hour =
($90,000 + $120,000 + $15,000) / 50,000
Variable Manufacturing Overhead Rate per Machine Hour = $225,000 / 50,000
Variable Manufacturing Overhead Rate per Machine Hour = $4.50 per machine hour
Calculate the Flexible Budget at 50,000 machine hours:
Flexible Budget = ($37,500 + $7,500 + $30,000) + ($4.50 * 50,000)
Flexible Budget = $75,000 + $225,000
Flexible Budget = $300,000
Therefore, the flexible budget at the 50,000 machine hours level of activity would show total manufacturing overhead costs of $300,000.
The correct answer is $300,000.