Question

Kerekes Manufacturing Corporation has prepared the following overhead budget for next month.

Activity level		2,600	machine-hours
Variable overhead costs:
Supplies	$	11,960
Indirect labor		22,100
Fixed overhead costs:
Supervision		15,600
Utilities		6,000
Depreciation		7,000
Total overhead cost	$	62,660

The company's variable overhead costs are driven by machine-hours.

What would be the total budgeted overhead cost for next month if the activity level is 2,500 machine-hours rather than 2,600 machine-hours?

Multiple Choice

$60,750

$60,250

$61,350

$62,660

.

Petrus Framing's cost formula for its supplies cost is $1,810 per month plus $8 per frame. For the month of March, the company planned for activity of 621 frames, but the actual level of activity was 628 frames. The actual supplies cost for the month was $6,970. The activity variance for supplies cost in March would be closest to:

Multiple Choice

$192 F

$56 F

$56 U

$192 U

Answer 1

KEREKES MANUFACTURING CORPORATION:
Total overhead budget for 2500 hours:
Variable overhead = (11960+22100)*25000/26000 =	$     32,750
Fixed overhead = 15600+6000+7000 =	$     28,600
Total overhead budget	$     61,350
PETRUS FARMING:
Activity variance = (Actual activity level-Planned Activity level)*Variable cost per activity unit = (628-621)*8 =	$       56.00	U