Question

Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 2,200 machine-hours Variable overhead costs: Supplies $ 9,240 Indirect labor 17,820 Fixed overhead costs: Supervision 15,300 Utilities 5,600 Depreciation 6,600 Total overhead cost $ 54,560 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 2,100 machine-hours rather than 2,200 machine-hours

Answer 1

Total budget = $53,330

Step-by-step explanation:

The total overhead is an example d of a mixed cost. A mixed cost is that made up of a variable portion and a fixed portion. The variable portion is driven by the activity level- machine hours. While the fixed portion is independent of the machine hours

Fixed overhead = 15,300 + 5,600+ 6600 = 27500

Variable overhead per hour = (54,560 -27500)/2200

= $12.3 per hour

Budget for 2,100 machine hours

= 27,500 + ($12.3× 2100)

= $53,330