Ceiling Fans by Ike\'s overhead budget for 2009 was as follows: Factory supervis

Question

Ceiling Fans by Ike's overhead budget for 2009 was as follows: Factory supervision $300,000 Utilities costs 150,000 Insurance 28,000 Property taxes 22,000 Depreciation 100,000 Total $600,000 600,000 units were produced in 2009. Direct labor cost is $18,000,000. For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour. In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels. Utilities costs vary proportionally with units produced. Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours. The 2010 expected production is 1,200,000 units.What will be the value for utilities costs in the 2010 overhead budget? Answer a. $300,000 b. $450,000 c. $420,000 d. $150,000

Explanation / Answer

Utilities budget in 2009 = 150,000

Target unit production in 2009 = 600,000 units

Target production in 2010 = 1,200,000 units

Utilities budget in 2010

= (150,000 / 600,000) * 1,200,000

= 300,000

(A)

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