You, using your accounting knowledge, had previously budgeted a cost of $8 per t
ID: 2447730 • Letter: Y
Question
You, using your accounting knowledge, had previously budgeted a cost of $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. Operating expenses are projected to be $80,000 annually.
After looking over the costs for manufacturing overhead and operating expenses, you approximate that 85% of manufacturing overhead and 20% of operating expenses are variable costs.
Jordan wants you to calculate a flexible manufacturing overhead budget assuming an annual level of 230,000 units instead of
Chapter 22 Questions:
1. What would be total manufacturing overhead variable costs for this new level? (Round to the nearest dollar.)
2. What would be total manufacturing overhead fixed costs for this new level? (Round to the nearest dollar.)
3. Taylor asks you if flexible budgets can be calculated on a monthly basis. You state, “Of course! Let’s create a monthly manufacturing overhead flexible budget for 20,000 units. Please pass me the brownies!” What would be total manufacturing overhead variable costs for this new level? (Round to the nearest dollar.)
4. Taylor asks you if flexible budgets can be calculated on a monthly basis. You state, “Of course! Let’s create a monthly manufacturing overhead flexible budget for 20,000 units. Please pass me the brownies!” What would be total manufacturing overhead fixed costs for this new level? (Round to the nearest dollar.)
5. Given an annual master budget of 200,000 units with actual production of 210,000 units, you have been tasked to formulate a flexible manufacturing overhead budget report. What will be total manufacturing overhead costs at the budget level?
Explanation / Answer
Answer: to the first 4 parts:
1) So the total variable manufacturing cost at the new level is $97,750
2) Total Fixed manufacturing cost at the new level is $15,000
3) Total monthly variable manufacturing cost at the new level of 20,000 units
= 20,000 units *0.425 per unit = $8,500
4) Total monthly Fixed manufacturing cost at the new level of 20,000 units:
Assuming that the fixed manufacturing overhead was incurred evenly through out the period, the monthly fixed manufacturing overhead cost would be = $15,000/12 = $1,250
Old level in $ Per Unit New level a Sales (no of units) 200000 230000 b Estimated manufacturing Overhead (in$) 100000 C Variable cost 85% 85000 0.425 (85000/20000) 97750 (230,000*$0.425) D Fixed Cost 15% 15000 15000Related Questions
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