causes Tol a 2,5,6 Decision Analysis: Developing a Flexible Budget and Analyzing

Question

causes Tol a 2,5,6 Decision Analysis: Developing a Flexible Budget and Analyzing Overhead Variances C4. BUSINESS APPLICATIONThe controller at FT Industries has asked yo assistant, to analyze the following data related to projected and actual overhead cosn October: Actual Standard Variable Costs per Machine Hour (MH) $1.10 2.50 1.40 1.50 0.80 0.10 $7.40 Variable Costs in Variable Overhead Costs Indirect materials and supplies Indirect machine setup labor Materials handling Maintenance and repairs Utilities Miscellaneous Totals October $ 2,380 5,090 3,950 2,980 1,490 200 $16,090

Explanation / Answer

2. Flexible Budget Formula = 13200 + $7.4 * No of machine hours

3. Fixed Overhead rate = Total Fixed Overheads / No of machine hours

= 13200 / 2200 = $6 per hour

Break down for each element of fixed overhead :

4.

1. Monthly Flexible Budget for October Fixed costs remain same at any level of machine hours and output. Variable Overhead Costs Standard variable costs per machine hour (MH) 2000 MH 2200 MH 2500 MH indirect materials and supplies 1.1 2200 [2000*1.1] 2420
[2200*1.1] 2750
[2500*1.1] indirect machine set up labor 2.5 5000
[2000*2.5] 5500
[2200*2.5] 6250
[2500*2.5] materials handling 1.4 2800
[2000*1.4] 3080
[2200*1.4] 3500
[2500*1.4] maintenenace and repaires 1.5 3000
[2000*1.5] 3300
[2200*1.5] 3750
[2500*1.5] utiities 0.8 1600
[2000*0.8] 1760
[2200*0.8] 2000
[2500*0.8] miscellaneous 0.1 200
[2000*0.1] 220
[2200*0.1] 250
[2500*0.1] Total Variable Cost 7.4 14800 16280 18500 Fixed Costs: supervisory salaries 3630 3630 3630 machine depreciation 8360 8360 8360 other 1210 1210 1210 Total fixed cost 13200 13200 13200 Total overhead cost (Total Fixed Cost + Variable Cost) 28000 29480 31700

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