Raney Company uses a flexible budget for manufacturing overhead based on direct

Question

Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hours are as follows:
Indirect Labor $1.00
Indirect materials 0.50
Utilities 0.40

Fixed Overhead costs per month are: supervisor $4,000, Depreciation $1,500, and Property Taxes $800. The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.
INSTRUCTIONS:
Prepare a monthly manufacturing overhead flexible budget for 2008 for the expected range of activity, using increments of 1,000 direct labor hours.

Explanation / Answer

Flexible budget for manufacting   over heads Particulars 7000hrs 8000hrs 9000hrs 10000hrs $ $ $ $ Indirect labor&indirect materials utilities($1+$0.5+0.4)$1.90 13300 15200 17100 19000 Fixed over heads Supervisior 4000 4000 4000 4000 Depreciation 1500 1500 1500 1500 Property taxes 800 800 800 800 19600 21500 23400 25300

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