Question

Flexible Overhead Budget

Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 9,000 hours of productive capacity in the department:

Variable overhead cost:
Indirect factory labor	$85,500
Power and light	2,700
Indirect materials	21,600
Total variable overhead cost		$109,800
Fixed overhead cost:
Supervisory salaries	$38,430
Depreciation of plant and equipment	24,160
Insurance and property taxes	15,370
Total fixed overhead cost		77,960
Total factory overhead cost		$187,760

Assuming that the estimated costs for November are the same as for October, prepare a flexible factory overhead cost budget for the Press Department for November for 7,000, 9,000, and 11,000 hours of production. Round your interim computations to the nearest cent, if required. Enter all amounts as positive numbers.

Leno Manufacturing Company
Factory Overhead Cost Budget-Press Department
For the Month Ended November 30
Direct labor hours	7,000	9,000	11,000
Variable overhead cost:
Indirect factory labor	$	$	$
Power and light
Indirect materials
Total variable factory overhead	$	$	$
Fixed factory overhead cost:
Supervisory salaries	$	$	$
Depreciation of plant and equipment
Insurance and property taxes
Total fixed factory overhead	$	$	$
Total factory overhead	$	$	$

Answer 1

Step-1:Calculate Variable cost per unit
	Variable costs		Total costs		Production hours		Variable overhead cost per unit
			a		b		a/b
	Indirect factory labor		$           85,500		9000		$            9.50
	Power and light		$             2,700		9000		$            0.30
	Indirect materials		$           21,600		9000		$            2.40
	Total		$       1,09,800		9000		$         12.20
Step-2:Calculate Variable cost at different level
	Variable costs		Variable overhead cost per unit			Production level			Production level			Production level
						Hours	Costs		Hours	Costs		Hours	Costs
	Indirect factory labor		$               9.50			7,000	$       66,500		9,000	$    85,500		11,000	$ 1,04,500
	Power and light		$               0.30			7,000	$         2,100		9,000	$      2,700		11,000	$       3,300
	Indirect materials		$               2.40			7,000	$       16,800		9,000	$    21,600		11,000	$     26,400
Step-3:Prepare flexible factory overhead cost budget
	Leno Manufacturing Company
	Factory Overhead Cost Budget-Press Department
	For the Month Ended November 30
	Direct Labor hours			7000	9000	11000
	Variable Overhead cost:
	Indirect factory labor			$       66,500	$             85,500	$ 1,04,500
	Power and light			$         2,100	$               2,700	$       3,300
	Indirect materials			$       16,800	$             21,600	$     26,400
	Total variable factory overhead			$       85,400	$         1,09,800	$ 1,34,200
	Fixed factory overhead cost:
	Supervisory salaries			$       38,430	$             38,430	$     38,430
	Depreciation of plant and equipment			$       24,160	$             24,160	$     24,160
	Insurance and property taxes			$       15,370	$             15,370	$     15,370
	Total fixed factory overhead			$       77,960	$             77,960	$     77,960
	Total factory overhead			$   1,63,360	$         1,87,760	$ 2,12,160
Note:Fixed costs are not changed due to change in production.