A company's planned activity level for next year is expected to be 100000 machine hours.At this level of activity the company budgeted the following manufacturing overhead costs: $\begin{array}{l}
\begin{array}{lr}
\quad\quad\quad\text { Variable }\
\hline \text { Indirect materials } & \$90,000 \
\text { Indirect labor } & 120,000 \
\text { Factory supplies } & 15,000
\end{array}\
\begin{array}{l}
\quad\quad\quad\quad\text { Fixed }\
\hline \text { Depreciation } & \$ 375000 \
\text { Taxes } & 7,500 \
\text { Supervision } & 30,000
\end{array}
\end{array}$ A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs of

Question

A company's planned activity level for next year is expected to be 100000 machine hours.At this level of activity the company budgeted the following manufacturing overhead costs: $\begin{array}{l}
\begin{array}{lr}
\quad\quad\quad\text { Variable }\
 \hline  \text { Indirect materials } & \$90,000 \
\text { Indirect labor } & 120,000 \
\text { Factory supplies } & 15,000
\end{array}\
\begin{array}{l}
\quad\quad\quad\quad\text { Fixed }\
\hline \text { Depreciation } & \$ 375000 \
\text { Taxes } & 7,500 \
\text { Supervision } & 30,000
\end{array}
\end{array}$ A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs of

Quizplus · Accepted Answer

The flexible budget adjusts variable costs based on the actual activity level. At 90,000 machine hours, variable costs are 90% of the budgeted level: $ (90,000 + 120,000 + 15,000) \times 0.9 = 202,500 $. Fixed costs remain the same at $412,500. Total overhead = $202,500 + $412,500 = $615,000.

A Company's Planned Activity Level for Next Year Is Expected