Question

NM company estimates the following costs for the coming month Variable overhead to direct labor ratio Fixed overhead costs Direct material to total costs ratio Estimated total costs Find variable overhead costs 60% $10,000 20% $100,000 O 1. Between 25,000.00 and $30,000.00 2. Between $38,000.00 and $44,000.00 3. Between $48,000.00 and $51.000.00 4. Between $58,000.00 and $62.000.00 ●ラ Moving to another question will save this response.

Answer 1

Solution 1:

Estimated total costs = $100,000

Direct material cost = $100,000*20% = $20,000

Fixed overhead cost = $10,000

Direct labor and variable overhead costs = $100,000 - $20,000 - $10,000 = $70,000

Variable overhead to direct labor ratio = 60%

Variable overhead = $70,000*60%/160% = $26,250

Therefore variable overhead costs between $25,000 and $30,000

Hence option 1 is correct.

Solution 2:

Budgeting is important for:

1. Exclusiveness for plannint and control

2. For future decision making

3. For all issues related to planning, control and decision making.

Hence option 4 "All of the above" are correct.