Question

Flexible Overhead Budget

Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 11,000 hours of productive capacity in the department:

Variable overhead costs:
Indirect factory labor	$95,700
Power and light	3,850
Indirect materials	27,500
Total variable overhead cost		$127,050
Fixed overhead costs:
Supervisory salaries	$44,470
Depreciation of plant and equipment	27,950
Insurance and property taxes	17,790
Total fixed overhead cost		90,210
Total factory overhead cost		$217,260

Assuming that the estimated costs for November are the same as for October, prepare a flexible factory overhead cost budget for the Press Department for November for 9,000, 11,000, and 13,000 hours of production. Round your interim computations to the nearest cent, if required. Enter all amounts as positive numbers.

Leno Manufacturing Company
Factory Overhead Cost Budget-Press Department
For the Month Ended November 30
Direct labor hours	9,000	11,000	13,000
Variable overhead costs:
Indirect factory labor	$	$	$
Power and light
Indirect materials
Total variable factory overhead	$	$	$
Fixed factory overhead costs:
Supervisory salaries	$	$	$
Depreciation of plant and equipment
Insurance and property taxes
Total fixed factory overhead	$	$	$
Total factory overhead	$	$	$

Answer 1

Note-

1. Middle row will be same as table 1 of the question as the production capacity is same.
2. Fixed overhead cost will not change for any of the case and remain same. The fixed cost are fixed in nature and does not change on the basis of production capacity. For example- In the above case, depreciation is a fixed cost and it will not change if we produce 11,000 hours or 1,000 hours. The total amount will be same in both the cases.

Direct labor hours	9,000	11,000	13,000
Variable overhead costs:
Indirect factory labor	$78,300	$95,700	$113,100
Power and light	3,150	3,850	4,550
Indirect materials	22,500	27,500	32,500
Total variable factory overhead	$103,950	$127,050	$150,150
Fixed factory overhead costs:
Supervisory salaries	$44,470	$44,470	$44,470
Depreciation of plant and equipment	27,950	27,950	27,950
Insurance and property taxes	17,790	17,790	17,790
Total fixed factory overhead	$90,210	$90,210	$90,210
Total factory overhead	$194,160	$217,260	$240,360

Workings:

Variable overhead Cost:

Indirect factory labor for 11,000 hours                                                $95,700

Indirect factory labor for 1 hour                                                             $95,700/11,000= $8.7/ hour

Indirect factory labor for 9,000 hour                                                    $8.7*9,000= $78,300

Indirect factory labor for 13,000 hour                                                  $8.7*13,000= $113,100

Power and light for 11,000 hours                                                         $3,850

Power and light for 1 hour                                                                      $3,850/11,000= $0.35/ hour

Power and light for 9,000 hour                                                             $0.35*9,000= $3,150

Power and light for 13,000 hour                                                           $0.35*13,000= $4,550

Indirect Materials for 11,000 hours                                                      $27,500

Indirect Materials for 1 hour                                                                  $27,500/11,000= $2.5/ hour

Indirect Materials for 9,000 hour                                                          $2.5*9,000= $22,500

Indirect Materials for 13,000 hour                                                        $2.5*13,000= $32,500