Thome Company uses a flexible budget for manufacturing overhead based on direct

Question

Thome 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

indirect materials .5

utilities .2      fixed overhead costs per month: Supervision 3707, Depreciation 1240 and Property Taxes 661 The company believes it will normally operate in a range of 5600-11300 direct labor hours per month prepare a monthly manufacturing overhead flexible budget for 2014 for the expected range of activity using increments of 1900 direct labor hours.

Explanation / Answer

Direct labour hour will be increased by 1900 :

Diretc labour hour 5600 7500 9400 11300

Variable cost

Indirect labour($1 per hour) 5600 7500 9400 11300

indirect labor($0.5) 2800 3750 4700 5650

Utilities($0.2) 1120 1500 1880 2260

Total variable cost 9520 12750 15980 19210

Fixed cost   

Supervision 3707 3707 3707 3707

Depreciation 1240 1240 1240 1240

Property tax 661 661 661 661

Total fixed cost 5608 5608 5608 5608

Total cost 15128 18358 21588 24818

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