Question

The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:

Indirect labor Machine supplies Indirect materials Depreciation on factory building Total manufacturing overhead
$720,000 180,000 210,000 150,000 $1,260,000
A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of:_______
a. $1,482,000.b. $1,260,000.c. $1,512,000.d. $1,362,000.

Answer 1

a. $1,482,000

Step-by-step explanation:

The computation of the total manufacturing overhead cost is shown below;

But before that first we need to do following calculations

The Variable overhead for 50000 machine hours is

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

= $1,110,000

As depreciation is not variable cost so it would be excluded

Now for 60,000 machine hours, the variable overhead is

= ($1,110,000 ÷ 50,000) × 60,000

= $1,332,000

And, the fixed overhead is $150,000 i.e depreciation expense

So, the total manufacturing overhead cost is

= Fixed manufacturing overhead + variable manufacturing overhead

= $150,000 + $1,332,000

= $1,482,000