E24-3 Raney Company uses a flexible budget for manufacturing overhead based on d

Question

E24-3 Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows:

Indirect labor $1.00
Indirect materials 0.50
Utilities 0.40
Fixed overhead costs per month are:
Supervision $4,000
Depreciation 1,500
Property Taxes 800
The company believes it will normally operate in a range of 7,000 to 10,000 direct
labor hours per month.

Instructions:
Prepare a monthly flexible manufacturing overhead budget for 2010 for the expected range of activity, using
increments of 1,000 direct labor hours.

RANEY COMPANY
Monthly Flexible Manufacturing Overhead Budget
For the Year 2010
Activity level Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Title Amount Amount Amount Amount
Title Amount Amount Amount Amount
Title Amount Amount Amount Amount
Title Formula Formula Formula Formula
Fixed costs
Title Amount Amount Amount Amount
Title Amount Amount Amount Amount
Title Amount Amount Amount Amount
Title Formula Formula Formula Formula
Total costs Formula Formula Formula Formula

Explanation / Answer

RANEY COMPANY Monthly Manufacturing Overhead Budget For the year 2010 Variable overhead: Per DLH 7000 DLH 8000 DLH 9000 DLH 10000 DLH Indirect labor $1 $7,000 $8,000 $9,000 $10,000 Indirect material $0.50 $3,500 $4,000 $4,500 $5,000 Utilities $0.40 $2,800 $3,200 $3,600 $4,000 Total variable cost - (A) $2 $13,300 $15,200 $17,100 $19,000 Fixed cost: Per Month Supervision $4,000 $4,000 $4,000 $4,000 $4,000 Depreciation $1,500 $1,500 $1,500 $1,500 $1,500 Property tax $800 $800 $800 $800 $800 Total fixed cost - (B) $6,300 $6,300 $6,300 $6,300 $6,300 Total Cost - (A + B) $19,600 $21,500 $23,400 $25,300 RANEY COMPANY Monthly Manufacturing Overhead Budget For the year 2010 Variable overhead: Per DLH 7000 DLH 8000 DLH 9000 DLH 10000 DLH Indirect labor $1 $7,000 $8,000 $9,000 $10,000 Indirect material $0.50 $3,500 $4,000 $4,500 $5,000 Utilities $0.40 $2,800 $3,200 $3,600 $4,000 Total variable cost - (A) $2 $13,300 $15,200 $17,100 $19,000 Fixed cost: Per Month Supervision $4,000 $4,000 $4,000 $4,000 $4,000 Depreciation $1,500 $1,500 $1,500 $1,500 $1,500 Property tax $800 $800 $800 $800 $800 Total fixed cost - (B) $6,300 $6,300 $6,300 $6,300 $6,300 Total Cost - (A + B) $19,600 $21,500 $23,400 $25,300
DLH = Direct Labor Hours Thank you.... RANEY COMPANY Monthly Manufacturing Overhead Budget For the year 2010 Variable overhead: Per DLH 7000 DLH 8000 DLH 9000 DLH 10000 DLH Indirect labor $1 $7,000 $8,000 $9,000 $10,000 Indirect material $0.50 $3,500 $4,000 $4,500 $5,000 Utilities $0.40 $2,800 $3,200 $3,600 $4,000 Total variable cost - (A) $2 $13,300 $15,200 $17,100 $19,000 Fixed cost: Per Month Supervision $4,000 $4,000 $4,000 $4,000 $4,000 Depreciation $1,500 $1,500 $1,500 $1,500 $1,500 Property tax $800 $800 $800 $800 $800 Total fixed cost - (B) $6,300 $6,300 $6,300 $6,300 $6,300 Total Cost - (A + B) $19,600 $21,500 $23,400 $25,300

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