Question

Q2: Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.

Indirect labor $1.20

Indirect materials 0.60

Utilities 0.50

Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500, and Property Taxes $800.The company believes it will normally operate in a range of 7,000–10,000 direct labor hours per month.

Instructions

Prepare a monthly manufacturing overhead flexible budget for 2010 for the expected range of activity, using increments of 1,050 direct labor hours.

Answer 1

Raney Company Monthly manufacturing overhead flexible budget For the Year 2020
Activity level :
Direct labor hour	7,000	8,050	9,100	10,000
Variable overhead :
Indirect labor - $ 1.20	$ 8,400	$ 9,660	$ 10,920	$ 12,000
Indirect materials - $ 0.60	$ 4,200	$ 4,830	$ 5,460	$ 6,000
Utilities - $ 0.50	$ 3,500	$ 4,025	$ 4,550	$ 5,000
Total variable cost	$ 16,100	$ 18,515	$ 20,930	$ 23,000
Fixed Overhead :
Supervision	$ 4,000	$ 4,000	$ 4,000	$ 4,000
Depreciation	$ 1,500	$ 1,500	$ 1,500	$ 1,500
Property taxes	$ 800	$ 800	$ 800	$ 800
Total Fixed overhead	$ 6,300	$ 6,300	$ 6,300	$ 6,300
Total Costs	$ 22,400	$ 24,815	$ 27,230	$ 29,300