Cody Co. developed its annual manufacturing overhead budget for its master budge
ID: 2489918 • Letter: C
Question
Cody Co. developed its annual manufacturing overhead budget for its master budget for 2016 as follows:
Expected annual operating capacity 120,000 Direct Labor Hours
Variable overhead costs
Indirect labor $600,000
Indirect materials 120,000
Factory supplies 60,000
Total variable 780,000
Fixed overhead costs
Depreciation 240,000
Supervision 120,000
Property taxes 96,000
Total fixed 456,000
Total costs $1,236,000
The relevant range for monthly activity is expected to be between 8,000 and 12,000 direct labor hours.
Instructions.
Prepare a flexible budget for a monthly activity level of 8,000 and 9,000 direct labor hours
Explanation / Answer
flexible buget 120,000 cost per 8000 9000 hours hour hours hours Variable overhead indirect labor 600,000 5 40000 45000 indirect materials 120,000 1 8000 9000 Factory supplies 60,000 0.5 4000 4500 total variable cost 780,000 6.5 52000 58500 Fixed overhead depreciation 240,000 240,000 240,000 supervision 120,000 120,000 120,000 property taxes 96,000 96,000 96,000 total fixed 456,000 456,000 456,000 total cost 1,236,000 508,000 514,500