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 $ 90 , 000 Depreciation $ 37 , 500 Indirect labor 120 , 000 Taxes 7 , 500 Factory supplies 15 , 000 Supervision 30 , 000 \begin{array}{lrlr} ext { Variable } & & ext { Fixed }\\hline ext { Indirect materials } & \$ 90,000 & ext { Depreciation } & \$ 37,500 \ ext { Indirect labor } & 120,000 & ext { Taxes } & 7,500 \ ext { Factory supplies } & 15,000 & ext { Supervision } & 30,000\end{array} Variable Indirect materials Indirect labor Factory supplies $90 , 000 120 , 000 15 , 000 Fixed Depreciation Taxes Supervision $37 , 500 7 , 500 30 , 000 A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs ofA) $202500.B) $270000.C) $277500.D) $225000.

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  $ 90 , 000  Depreciation  $ 37 , 500  Indirect labor  120 , 000  Taxes  7 , 500  Factory supplies  15 , 000  Supervision  30 , 000 \begin{array}{lrlr}	ext { Variable } & & 	ext { Fixed }\\hline 	ext { Indirect materials }  &  \$ 90,000  &  	ext { Depreciation }  &  \$ 37,500 \	ext { Indirect labor }  &  120,000  &  	ext { Taxes }  &  7,500 \	ext { Factory supplies }  &  15,000  &  	ext { Supervision }  &  30,000\end{array}  Variable   Indirect materials   Indirect labor   Factory supplies  ​ $90 , 000 120 , 000 15 , 000 ​  Fixed   Depreciation   Taxes   Supervision  ​ $37 , 500 7 , 500 30 , 000 ​ ​   A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs ofA)  $202500.B)  $270000.C)  $277500.D)  $225000.

Camila Quiroga · Accepted Answer

Final Answer : C, Explanation :  The flexible budget at 90,000 machine hours can be calculated by adjusting the variable costs proportionally and keeping the fixed costs constant. Variable costs (Indirect materials + Indirect labor + Factory supplies) at 100,000 machine hours are $225,000. At 90,000 machine hours, they would be 90% of $225,000, which is $202,500. Fixed costs (Depreciation + Taxes + Supervision) total $75,000 and do not change with the level of activity. Therefore, the total manufacturing overhead costs at 90,000 machine hours would be $202,500 (variable) + $75,000 (fixed) = $277,500.

Definitions

Learning Objectives

Learning Objectives

Related questions