A department has budgeted monthly manufacturing overhead cost of $540,000 plus $
ID: 2497303 • Letter: A
Question
A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was:
348,000 direct labor hours.
168,000 direct labor hours.
528,000 direct labor hours.
Cannot be determined from the information provided.
a.348,000 direct labor hours.
b.168,000 direct labor hours.
c.528,000 direct labor hours.
d.Cannot be determined from the information provided.
Explanation / Answer
Budgeted fixed monthly manufacturing overhead cost = $540,000
Budgeted variable manufacturing overhead cost = $3 per direct labor hour
Total budgeted manufacturing cost for the month as reported by the flexible budget = $1,044,000
The actual level of activity should be computed by subtracting the budgeted fixed monthly overhead cost from the total budgeted manufacturing cost for the month as reported by the flexible budget and dividing the remaining balance by $3.
Actual level of activity achieved during the month = ($1,044,000 - $540,000) / $3 = 168,000 direct labor hours.
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