The master budget of Marigold Corp. shows that the planned activity level for ne

Question

The master budget of Marigold Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:

Question 1 The master budget of Marigold Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: Indirect labor Machine supplies Indirect materials Depreciation on factory building Total manufacturing overhead$1370000 $800000 250000 250000 70000 A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of $1630000 O $1370000. $1644000. $1574000.

Explanation / Answer

Total variable cost=(800,000+250,000+250,000)=$1,300,000

Hence VC/unit=(1,300,000/50,000)=$26

NHence total overhead cost at 60,000 hours=(60000*26)+70,000

=$1,630,000(A)

NOTE:Total fixed costs and variable cost/unit do not change with change in units.

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