Question

A company’s planned activity level for next year is expected to be 100000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $50000

Depreciation $37500
Indirect labor 80000
Taxes 7500
Factory supplies 9000
Supervision 30000
A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs of

Answer 1

The total manufacturing overhead is $200,100

Step-by-step explanation:

The flexible budget prepared below is based on the original budget for 100,000 machine hours adjusted to 90,000 hours

indirect materials(variable)$50,000/100,000*90,000=$45,000

depreciation(fixed) =$37,500

indirect labor(variable )$80,000/100,000*90,000 =$72000

taxes(fixed) =$7,500

factory supplies(variable)$9000/100,000*90000 =$8,100

supervision(fixed) =$30,000

total manufacturing overhead $200,100

The total manufacturing overhead is $200,100 based on the fact that variable cost varies with output while fixed costs remain the same