Question

Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 2,500 machine-hours Variable overhead costs: Supplies $ 12,250 Indirect labor 22,000 Fixed overhead costs: Supervision 15,500 Utilities 5,500 Depreciation 6,500 Total overhead cost $ 61,750 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 2,400 machine-hours rather than 2,500 machine-hours

Answer 1

Answer:

$60,380

Explanation:

Given that,

Activity level = 2,500 machine-hours

Variable overhead costs:

Supplies = $ 12,250

Indirect labor = $22,000

Fixed overhead costs:

Supervision = 15,500

Utilities = 5,500

Depreciation = 6,500

Total overhead cost = $ 61,750

At activity level of 2,500, the total variable overhead cost is as follows:

= Supplies + Indirect labor

= 12,250 + 22,000

= 34,250

At activity level of 2,400, the total variable overhead cost is as follows:

$=Total\ variable\ overhead\times \frac{2,400}{2,500}$

$=34,250\times \frac{2,400}{2,500}$

= $32,880

Total fixed overhead:

= Supervision + Utilities + Depreciation

= 15,500 + 5,500 + 6,500

= $27,500

Total budgeted overhead at 2,400 machine hours:

= Total variable cost at 2,400 hours + Total fixed cost

= $32,880 + $27,500

= $60,380