Kerekes Manufacturing Corporation has prepared the following overhead budget for

Question

Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level 3,600 machine- hours Variable overhead costs: Supplies Indirect labor $20,160 34,200 Pixed overhead costst Supervinion Utilities Depreciation 16,500 7,000 8,000 $85,860 Total overhead cost 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 3,500 machine-hours rather than 3,600 machine-hours?

Explanation / Answer

Total Variable overhead=(20160+34200)=$54360

Variable overhead/machine hour=(54360/3600)=$15.1/machine hour

Total fixed overhead=(16500+7000+8000)=$31500

Hence total overhead=(15.1*3500)+31500

=$84350.

NOTE:Total fixed overhead and Variable overhead/unit do not change with change in units.

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