Question

# A company’s planned activity level for next year is expected to be 100000 machine hours. At...

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 \$190000 Depreciation \$50000Indirect labor 130000 Taxes 10000Factory supplies 27000 Supervision 40000A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs of

Computation of variable costs for 90,000 MH:

Indirect material = (\$ 190,000/100,000) x 90,000 = 1.9 x 90,000 = \$ 171,000

Indirect labor = (\$ 130,000/100,000) x 90,000 = 1.3 x 90,000 = \$ 117,000

Factory supplies = (\$ 27,000/100,000) x 90,000 = 0.27 x 90,000 = \$ 24,300

Total manufacturing overhead = Indirect material + Indirect labor + Factory supplies + Depreciation + Taxes + Supervision

= \$ 171,000 + \$ 117,000 + \$ 24,300 + \$ 50,000 + \$ 10,000 + \$ 40,000 = \$ 412,300

Total manufacturing overhead for activity level of 90,000 MH will be \$ 412,300

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