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 $ 140 , 000 Depreciation $ 60 , 000 Indirect labor 200 , 000 Taxes 10 , 000 Factory supplies 20 , 000 Supervision 50 , 000 \begin{array}{lrlr} ext { Variable } & & ext { Fixed }\\hline ext { Indirect materials } & \$ 140,000 & ext { Depreciation } & \$ 60,000 \ ext { Indirect labor } & 200,000 & ext { Taxes } & 10,000 \ ext { Factory supplies } & 20,000 & ext { Supervision } & 50,000\end{array} Variable Indirect materials Indirect labor Factory supplies $140 , 000 200 , 000 20 , 000 Fixed Depreciation Taxes Supervision $60 , 000 10 , 000 50 , 000 A flexible budget prepared at the 80000 machine hours level of activity would show total manufacturing overhead costs ofA) $288000.B) $360000.C) $384000.D) $408000.

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  $ 140 , 000  Depreciation  $ 60 , 000  Indirect labor  200 , 000  Taxes  10 , 000  Factory supplies  20 , 000  Supervision  50 , 000 \begin{array}{lrlr}	ext { Variable } & & 	ext { Fixed }\\hline 	ext { Indirect materials }  &  \$ 140,000  &  	ext { Depreciation }  &  \$ 60,000 \	ext { Indirect labor }  &  200,000  &  	ext { Taxes }  &  10,000 \	ext { Factory supplies }  &  20,000  &  	ext { Supervision }  &  50,000\end{array}  Variable   Indirect materials   Indirect labor   Factory supplies  ​ $140 , 000 200 , 000 20 , 000 ​  Fixed   Depreciation   Taxes   Supervision  ​ $60 , 000 10 , 000 50 , 000 ​ ​   A flexible budget prepared at the 80000 machine hours level of activity would show total manufacturing overhead costs ofA)  $288000.B)  $360000.C)  $384000.D)  $408000.

Nicholas Fedak · Accepted Answer

Final Answer : D, Explanation :  The flexible budget at 80,000 machine hours would include both variable and fixed costs. Variable costs change with the level of activity, so they would be adjusted to 80% of their original budget (since 80,000 is 80% of 100,000 hours). Fixed costs remain the same regardless of the level of activity. Therefore, the calculation is as follows:- Variable costs at 100,000 hours: $140,000 (Indirect materials) + $200,000 (Indirect labor) + $20,000 (Factory supplies) = $360,000.- Variable costs at 80,000 hours (80% of original): $360,000 * 0.8 = $288,000.- Fixed costs (unchanged): $60,000 (Depreciation) + $10,000 (Taxes) + $50,000 (Supervision) = $120,000.- Total costs at 80,000 hours: $288,000 (Variable) + $120,000 (Fixed) = $408,000.

Definitions

Learning Objectives

Learning Objectives

Related questions