Henson Company developed its annual manufacturing overhead budget for its master
ID: 2372348 • Letter: H
Question
Henson Company developed its annual manufacturing overhead budget for its master budget for 2010 as follows:
Expected annual operating capacity 120,000 Direct Labor Hours
Variable overhead costs
Indirect labor $420,000
Indirect materials 90,000
Factory supplies 30,000
Total variable 540,000
Fixed overhead costs
Depreciation 180,000
Supervision 120,000
Property taxes 96,000
Total fixed 396,000
Total costs $936,000
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 Budget Expected annual operating capacity 8000 DLH 9000 DLH Variable overhead costs Indirect labor $ 28,000.00 $ 31,500.00 Indirect materials $ 6,000.00 $ 6,750.00 Factory supplies $ 2,000.00 $ 2,250.00 Total variable $ 36,000.00 $ 40,500.00 Fixed overhead costs Depreciation $ 15,000.00 $ 15,000.00 Supervision $ 10,000.00 $ 10,000.00 Property taxes $ 8,000.00 $ 8,000.00 Total fixed $ 33,000.00 $ 33,000.00 Total costs $ 69,000.00 $ 73,500.00
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