Kerekes Manufacturing Corporation has prepared the following overhead budget for
ID: 2589189 • Letter: K
Question
Kerekes Manufacturing Corporation has prepared the following overhead budget for next month.
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 2,600 machine-hours rather than 2,700 machine-hours?
Multiple Choice
$63,670
$63,180
$64,280
$65,610
Activity level 2,700 machine-hours Variable overhead costs: Supplies $ 12,690 Indirect labor 23,220 Fixed overhead costs: Supervision 16,500 Utilities 6,100 Depreciation 7,100 Total overhead cost $ 65,610Explanation / Answer
Variable overhead cost per unit = 12690 + 23220
2700
= $ 13.3 per machine hour.
Fixed overhead cost per unit = 16500 + 6100 + 7100
2700
= $ 11 per machine hour.
BUDGETED OVERHEAD COST FOR NEXT MONTH
HEADINGS
CALCULATIONS
AMOUNT IN $
Variable Overhead cost
2600 machine hours * $13.3
34580
Fixed Overhead cost
2700 machine hours * $ 11.0
29700
TOTAL OVERHEAD COST
64280
Note: For budget, fixed overhead cost is calculated at total capacity since fixed overhead remains same irrespective of actual units.
Total Budgeted overhead cost would be $64,280 for next month when activity level is 2,600 machine hours.
BUDGETED OVERHEAD COST FOR NEXT MONTH
HEADINGS
CALCULATIONS
AMOUNT IN $
Variable Overhead cost
2600 machine hours * $13.3
34580
Fixed Overhead cost
2700 machine hours * $ 11.0
29700
TOTAL OVERHEAD COST
64280
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