Question

Multiple Choice Question 74 Crane Company prepared a fixed budget of 40000 direct labor hours, with estimated overhead costs of $200000 for variable overhead and $90000 for fixed overhead. Crane then prepared a flexible budget at 37000 labor hours. How much is total overhead costs at this level of activity

Answer 1

$275,000

Step-by-step explanation:

Please refer to the below for the computation of the total overhead cost

= Variable overhead cost + Fixed overhead cost

Where,

Variable overhead costs

= (Total estimated overhead cost ÷ Fixed direct labor hours) × Flexible budget labor hours

= ($200,000 ÷ 40,000) × 37,000

= $185,000

Recall that the fixed overhead cost is $90,000

Therefore,

Total overhead cost = $185,000 + $90,000

Total overhead cost = $275,000