Johnson Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows:
Indirect Labor: $1.00
Indirect Materials: $0.50
Utilities: $0.30
Fixed overhead costs per month are Supervision $4,200, Depreciation $1,800, and property taxes $600. The company believes it will normally operate in a range of 5,900-11,900 direct labor hours per month.
-Prepare a monthly manufacturing overhead flexible budget for 2020 for the expected range of activity, using increments of 2,000 direct labor hours.
Answer-
JOHNSON COMPANY | ||||
Monthly Manufacturing Overhead Flexible Budget | ||||
Direct labor hours | 5900 | 7900 | 9900 | 11900 |
Variable costs:- | $ | $ | $ | $ |
Indirect labor | 5900 hours*$1.00 per hour=5900 | 7900 hours*$1.00 per hour=7900 | 9900 hours*$1.00 per hour=9900 | 11900 hours*$1.00 per hour=11900 |
Indirect materials | 5900 hours*$0.50 per hour=2950 | 7900 hours*$0.50 per hour=3950 | 9900 hours*$0.50 per hour=4950 | 11900 hours*$0.50 per hour=5950 |
Utilities | 5900 hours*$0.30 per hour=1770 | 7900 hours*$0.30 per hour=2370 | 9900 hours*$0.30 per hour=2970 | 11900 hours*$0.30 per hour=3570 |
Total variable costs (a) | 10620 | 14220 | 17820 | 21420 |
Fixed costs:- | ||||
Supervision | 4200 | 4200 | 4200 | 4200 |
Depreciation | 1800 | 1800 | 1800 | 1800 |
Property Tax | 600 | 600 | 600 | 600 |
Total fixed costs (b) | 6600 | 6600 | 6600 | 6600 |
Total costs (c=a+b) | 17220 | 20820 | 24420 | 28020 |
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