A department has budgeted monthly manufacturing overhead cost of $540000 plus $3 per direct labor hour. If a flexible budget report reflects $1044000 for total budgeted manufacturing cost for the month the actual level of activity achieved during the month was
A) 528000 direct labor hours.
B) 168000 direct labor hours.
C) 348000 direct labor hours.
D) Cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

The total budgeted manufacturing cost is given as $1,044,000. The fixed component of this cost is $540,000. The variable component is $3 per direct labor hour. To find the actual level of activity (direct labor hours), subtract the fixed cost from the total budgeted cost and then divide by the variable cost per hour: ($1,044,000 - $540,000) / $3 = 168,000 direct labor hours.

A Department Has Budgeted Monthly Manufacturing Overhead Cost of $540000