Question

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of: A.None of the answers is correct. B.$350,000. C.$290,000. D.$270,000. E.$210,000..

Answer 1

Option (D) $270,000

Step-by-step explanation:

Data provided in the question:

Variable overhead for 15,000 hours = $90,000

Fixed manufacturing overhead = $120,000

Now,

Variable overhead per hour = $90,000 ÷ 15,000

= $6 per hour

Therefore,

Variable overhead for 25,000 hours = $6 per hour × 25,000

= $150,000

Thus,

Total overhead cost

= Variable overhead for 25,000 hours + Fixed overhead cost

[ Fixed overhead cost is independent of number of units or number of hours]

= $150,000 + $120,000

= $270,000

hence,

Option (D) $270,000