Question

Berne, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor $5.00 Indirect materials 2.50 Maintenance .80 Utilities .30 Fixed overhead costs per month are: Supervision $800 Insurance 200 Property taxes 300 Depreciation 900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. Prepare a flexible manufacturing overhead budget for the expected range of activity, using increments of 1,000 machine hours. (List variable costs before fixed costs.)

Answer 1

Answer and Explanation:

As per the data given in the question,

Flexible manufacturing overhead budget

Activity level :

Machine hours 2,000 hours 3,000 hours 4,000 hours

Variable costs :

Indirect labor $5 $10,000 $15,000 $20,000

Indirect material $2.50 $5,000 $7,500 $10,000

Maintenance $0.80 $1,600 $2,400 $3,200

Utilities $0.30 $600 $900 $1,200

Total variable cost $22,600 $25,800 $34,400

Fixed costs :

Supervision $800 $800 $800

Insurance $200 $200 $200

Property taxes $300 $300 $300

Depreciation $900 $900 $900

Total Fixed cost $2,200 $2,200 $2,200

Total Cost $24,800 $28,000 $36,600