Question

Flexible overhead budget Wiki Wiki Company has determined that the variable overhead rate is $2.50 per direct labor hour in the Fabrication Department. The normal production capacity for the Fabrication Department is 12,000 hours for the month. Fixed costs are budgeted at $42,000 for the month. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet a. Prepare a monthly factory overhead flexible budget for 10,000, 12,000, and 14,000 hours of production. Wiki Wiki Company Monthly Factory Overhead Cost Budget - Fabrication Department Direct labor hours 10,000 12,000 14,000 Variable factory overhead cost Fixed factory overhead cost Total factory overhead cost b. How much overhead would be applied to production if 10,000 hours were used in the department during the month? Round your answer to the nearest dollar.

Answer 1

a)

Direct labour hours	10,000	12,000	14,000
Variable factory overhead cost	$25,000	$30,000	$35,000
Fixed factory overhead cost	$42,000	$42,000	$42,000
Total factory overhead cost	$67,000	$72,000	$77,000

For 12,000 hrs capacity the total overhead cost is $72,000

Overhead for 10,000 hrs = ($72,000 / 12,000) X 10,000 = $60,000

b) $60,000