P24-1A Malone Company estimates that 360,000 direct labor hours will be worked d
ID: 2356828 • Letter: P
Question
P24-1A Malone Company estimates that 360,000 direct labor hours will be worked during the comingyear, 2010, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data
are computed for the year.
Fixed Overhead Costs Variable Overhead Costs
Supervision $90,000 Indirect labor $126,000
Depreciation 60,000 Indirect materials 90,000
Insurance 30,000 Repairs 54,000
Rent 24,000 Utilities 72,000
Property taxes 18,000 Lubricants 18,000
$222,000 $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 Variable Overhead Costs
Supervision $7,500 Indirect labor $10,360
Depreciation 5,000 Indirect materials 6,400
Insurance 2,470 Repairs 4,000
Rent 2,000 Utilities 5,700
Property taxes 1,500 Lubricants 1,640
Instructions:
(a) Prepare a monthly flexible manufacturing overhead budget for each increment of 3,000 direct
labor hours over the relevant range for the year ending December 31, 2010.
Explanation / Answer
27000 Hours 30000 Hours 33000 Hours 36000 Hours a Variable OH 27,000.00 30,000.00 33,000.00 36,000.00 Fixed OH : Supervision 7,500.00 7,500.00 7,500.00 7,500.00 Depreciation 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 2,500.00 2,500.00 2,500.00 2,500.00 Rent 2,000.00 2,000.00 2,000.00 2,000.00 Property Taxes 1,500.00 1,500.00 1,500.00 1,500.00 Total Overheads 45,500.00 48,500.00 51,500.00 54,500.00 Working Notes : Variable Overheads : Indirect Labor 126,000.00 Indirect Material 90,000.00 Repairs 54,000.00 Utilities 72,000.00 Lubricants 18,000.00 Total Variable Overhead 360,000.00 Budgeted Direct Labor hours 360,000.00 Variable OH per hour 1.00 Fixed Overheads will remain same at all levels of activities. They have been divided by 12 to get the FOH per month
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