An Internet gourmet foods company, “Yumminess”, will be including “Chocolate Att

Question

An Internet gourmet foods company, “Yumminess”, will be including “Chocolate Attack Brownies” (CAB) in their online catalog. CAB will be sold in square tins and captioned with personal greetings. Jordan negotiated a selling price to Yumminess at $10 per tin. You, using your accounting knowledge, had previously budgeted a cost of $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. Operating expenses are projected to be $80,000 annually. After looking over the costs for manufacturing overhead and operating expenses, you approximate that 85% of manufacturing overhead and 20% of operating expenses are variable costs.

1. What would be total variable manufacturing overhead costs for this new level? (Round to the nearest dollar.)

2. What would be total fixed manufacturing overhead costs for this new level? (Round to the nearest dollar.)

3. Taylor asks you if flexible budgets can be calculated on a monthly basis. You state, “Of course! Let’s create a monthly manufacturing overhead flexible budget for 20,000 units. Please pass me the brownies!” What would be total variable manufacturing overhead costs for this new level? (Round to the nearest dollar.)

4. Taylor asks you if flexible budgets can be calculated on a monthly basis. You state, “Of course! Let’s create a monthly manufacturing overhead flexible budget for 20,000 units. Please pass me the brownies!” What would be total fixed manufacturing overhead costs for this new level? (Round to the nearest dollar.)

5. Given an annual master budget of 200,000 units with actual production of 210,000 units, you have been tasked to formulate a flexible budget report. What will be total manufacturing overhead costs at the budget level?

Explanation / Answer

the total variable manufacturing costs for this new level is 100000*0.85=$85000 i.e 0.425 dollar per tin.

The total fixed manufacturing overhead is 1,00,000*0.15=$15000 i.e 0.075dollar per tin

the total variable manufacturing over head for 20000 units is 20000*0.425=8500dollars

The total fixed manufacturing over head for 20000 units is 20000*0.075=1500 dollars

The total manufacturing over head for production of 210000 units = 210000*.425dollars+15000dollars

89250+15000 i.e 104250 dollars

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