Question

The master budget of Tenenbaum Ltd. shows that the planned activity level for next year is expected to be 30,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:

Indirect labor................................................. $720,000
Machine supplies..........................................180,000
Indirect materials..........................................210,000
Depreciation on factory building..................150,000
Total manufacturing overhead.....................$1,260,000

A flexible budget for a level of activity of 40,000 machine hours would show total manufacturing overhead costs of:________

Answer 1

$1,630,000

Step-by-step explanation:

The computation of the flexible budget for a level of activity of 40,000 machine hours would show total manufacturing overhead costs is shown below:-

Variable overhead for 30,000 machine hours

= $1,260,000 - $150,000 = $1,110,000

Variable overhead for 40,000 machine hours

= ($1,110,000 / 30,000) × 40,000 = $1,480,000 (a)

Fixed overhead = Depreciation = $150,000 (b)

Total manufacturing Overhead (a + b)

= $14,80,000 + $150,000

= $1,630,000