Wiki Wiki Company has determined that the variable overhead rate is $4.50 per di

Question

Wiki Wiki Company has determined that the variable overhead rate is $4.50 per direct labor hour in the Fabrication Department. The normal production capacity for the Fabrication Department is 10,000 hours for the month. Fixed costs are budgeted at $60,000 for the month.

a. Prepare a monthly factory overhead flexible budget for 9,000, 10,000, and 11,000 hours of production. Enter all amounts as positive numbers.

b. How much overhead would be applied to production if 9,000 hours were used in the department during the month? If required, round your calculations to two decimal places and your final answer to the nearest dollar.
$

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a. Prepare a monthly factory overhead flexible budget for 9,000, 10,000, and 11,000 hours of production. Enter all amounts as positive numbers.

Wiki Wiki Company Monthly Factory Overhead Cost Budget-Fabrication Department Direct labor hours 9,000 10,000 11,000 Variable factory overhead cost $ $ $ Fixed factory overhead cost Total factory overhead $ $ $

Explanation / Answer

Solution to Part (b)

Normal Production : 10,000 Units

Total Factory Overheads : $ 105,000

Factory Overhead Cost per unit : $ 105,000 / 10,000 Units = $ 10.5 per unit

Factory Ovehead Cost absorbed when 9,000 hours used in the department

= 9,000 Hours X $ 10.5 per Unit

= $ 94,500.

Thus a Factory Oveheads of $ 94,500 will be absorbed when 9,000 hours are used in the department.

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