Question

Wiki Wiki Company has determined that the variable overhead rate is $3.70 per direct labor hour in the Fabrication Department. The normal production capacity for the Fabrication Department is 11,000 hours for the month. Fixed costs are budgeted at $81,400 for the month.

	Required:
A.	Prepare a monthly factory overhead flexible budget for 10,000, 11,000, and 12,000 hours of production.
B.	How much overhead would be applied to production if 10,000 hours were used in the department during the month?

Answer 1

Answer
a
	WIKI WIKI COMPANY
Monthly Factory Overhead Cost Budget—Fabrication Department
Direct labor hours	10,000	11,000	12,000
Variable factory overhead cost	$       37,000	$       40,700	$       44,400
Fixed factory overhead cost	$       81,400	$       81,400	$       81,400
Total factory overhead	$     118,400	$     122,100	$     125,800
b
Fixed overhead is applied based on normal production
Overhead rate = 3.7+(81400/11000)= $11.10
Overhead applied to production = 10000*11.10= $111,000