Flexible Overhead Budget Leno Manufacturing Company prepared the following facto

Question

Flexible Overhead Budget

Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 9,000 hours of productive capacity in the department:

Assuming that the estimated costs for November are the same as for October, prepare a flexible factory overhead cost budget for the Press Department for November for 7,000, 9,000, and 11,000 hours of production. Round your interim computations to the nearest cent, if required. Enter all amounts as positive numbers.

Variable overhead costs:    Indirect factory labor $87,300    Power and light 3,780    Indirect materials 27,000       Total variable overhead cost $118,080 Fixed overhead costs:    Supervisory salaries $41,330    Depreciation of plant and equipment 25,980    Insurance and property taxes 16,530       Total fixed overhead cost 83,840 Total factory overhead cost $201,920

Explanation / Answer

Solution - Fixed Overhead budget

Leno Manufacturing company

Factory Overhead cost budget - Press Department

For the Month ended November 30

$67900

($87300/9000*7000)

$106700

($87300/9000*11000)

$2940

($3780/9000*7000)

$4620

($3780/9000*11000)

$21000

($27000/9000*7000)

$33000

($27000/9000*11000)

Note :

a) Fixed cost does not change with the change in activity level. Fixed cost

b) Variable cost changes with the change in activity level.

Direct Labour Hours 7000 Hours 9000 Hours 11000 Hours Variable Overhead cost Indirect Factory labour

$67900

($87300/9000*7000)

$87300

$106700

($87300/9000*11000)

Power and light

$2940

($3780/9000*7000)

$3780

$4620

($3780/9000*11000)

Indirect Materials

$21000

($27000/9000*7000)

$27000

$33000

($27000/9000*11000)

Total Variable factory Overhead (A) $91840 $118080 $144320 Fixed Factory overhead cost Supervisory salaries $41330 $41330 $41330 Depreciation of Plant and equipment $25980 $25980 $25980 Insurance and Property taxes $16530 $16530 $16530 Total Fixed factory Overhead (B) $83840 $83840 $83840 Total Factory Overhead (A+B) $175680 $201920 $228160

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