Cook Company estimates that 300,000 direct labor hours will be worked during the
ID: 2720422 • Letter: C
Question
Cook Company estimates that 300,000 direct labor hours will be worked during the coming year, 2014, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year.
Fixed Overhead Costs
Variable Overhead Costs
$96,000
$126,000
72,000
90,000
30,000
54,000
24,000
72,000
18,000
18,000
$240,000
$360,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.
During October, 27,000 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: Supervision $8,000, Depreciation $6,000, Insurance $2,460, Rent $2,000, and Property taxes $1,500.
Variable overhead costs: Indirect labor $12,432, Indirect materials, $7,680, Repairs $4,800, Utilities $6,840, and Lubricants $1,920.
Fixed Overhead Costs
Variable Overhead Costs
Supervision$96,000
Indirect labor$126,000
Depreciation72,000
Indirect materials90,000
Insurance30,000
Repairs54,000
Rent24,000
Utilities72,000
Property taxes18,000
Lubricants18,000
$240,000
$360,000
Explanation / Answer
Monthly manufacturing overhead flexible Budeget for the year ending december, 2014
27000
direct hour
variable
cost per unit
27000
direct hour
direct hour 33000
direct hour 36000
direct hour indirect labour 0.42 (126000/300000) 11340 12600 13860 15120 Indirect Material 0.30 (90000/300000) 8100 9000 9900 10800 repair 0.18 (54000/300000) 4860 5400 5940 6480 Utilities 0.24 (72000/300000) 6480 7200 7920 8640 Lubricants 0.06 (18000/300000) 1620 1800 1980 2160 total variable overhead cost (A) 32400 36000 39600 43200 Fixed Overhead Supervision 8000=96000/12 8000 8000 8000 8000 Depreciation 6000 =72000/12 6000 6000 6000 6000 Insurance 2500= 30000/12 2500 2500 2500 2500 Rent 2000= 24000/12 2000 2000 2000 2000 Property taxes 1500= 18000/12 1500 1500 1500 1500 Total Fixed Overhead Cost (B) 20000 20000 20000 20000 Total manufacturing overhead (A+B) 52400 56000 59600 63200