Question

A company's planned activity level for next year is expected to be 200,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $280,000 Depreciation $120,000 Indirect labor 400,000 Taxes 30,000 Factory supplies 40,000 Supervision 100,000 A flexible budget prepared at the 160,000 machine hours level of activity would show total manufacturing overhead costs of: a. $826,000. b. $696,000. c. $720,000. d. $576,000.

Answer 1

a. $826,000.

Step-by-step explanation:

The computation of the total manufacturing overhead is given below;

= (Indirect materials + indirect labor + factory supplies) ÷ expected machine hours × budgeted + (Depreciation + taxes + supervision)

= ($280,000 + $400,000 + $40,000) ÷ 200,000 × 160,000 + ($120,000 + $30,000 + $100,000)

= $826,000

Hence, the correct option is a.