The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity the following manufacturing overhead costs are expected: Indirect labor $ 720 , 000 Machine supplies 180 , 000 Indirect materials 210 , 000 Depreciation on factory building 150 , 000 Total manufacturing overhead $ 1 , 260 , 000 \begin{array} { l r } ext { Indirect labor } & \$ 720,000 \ ext { Machine supplies } & 180,000 \ ext { Indirect materials } & 210,000 \ ext { Depreciation on factory building } & 150,000 \ ext { Total manufacturing overhead } & \$ 1,260,000\end{array} Indirect labor Machine supplies Indirect materials Depreciation on factory building Total manufacturing overhead $720 , 000 180 , 000 210 , 000 150 , 000 $1 , 260 , 000 A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs ofA) $1482000.B) $1260000.C) $1512000.D) $1362000.

Question

The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity the following manufacturing overhead costs are expected:    Indirect labor  $ 720 , 000  Machine supplies  180 , 000  Indirect materials  210 , 000  Depreciation on factory building  150 , 000  Total manufacturing overhead  $ 1 , 260 , 000 \begin{array} { l r } 	ext { Indirect labor }  &  \$ 720,000 \	ext { Machine supplies }  &  180,000 \	ext { Indirect materials }  &  210,000 \	ext { Depreciation on factory building }  &  150,000 \	ext { Total manufacturing overhead }  &  \$ 1,260,000\end{array}  Indirect labor   Machine supplies   Indirect materials   Depreciation on factory building   Total manufacturing overhead  ​ $720 , 000 180 , 000 210 , 000 150 , 000 $1 , 260 , 000 ​   A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs ofA)  $1482000.B)  $1260000.C)  $1512000.D)  $1362000.

Amanda Borer · Accepted Answer

Final Answer : A, Explanation :  To calculate the flexible budget for 60,000 machine hours, we need to adjust the variable costs (indirect labor, machine supplies, and indirect materials) while keeping the fixed cost (depreciation on factory building) constant. The variable costs total $1,110,000 ($720,000 + $180,000 + $210,000). The variable cost per machine hour is $1,110,000 / 50,000 = $22.20. For 60,000 machine hours, the variable costs would be 60,000 * $22.20 = $1,332,000. Adding the fixed cost of $150,000 gives a total manufacturing overhead of $1,482,000.

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