In: Accounting
Dakota Enterprises static budget estimate of total overhead costs was $300,000 based on the assumption that 10,000 units would be produced and sold. The company estimates that 40% of its overhead is fixed and that the remainder is variable. What would be the total overhead cost according to the flexible budget if 12,500 units would be produced and sold. Provide the answer and show your work, including an explanation.
Particulars | 10,000 Units |
Amount($) | |
Total Overhead Cost | 3,00,000 |
Less: Fixed Overhead (300,000*40%) | -1,20,000 |
Variable Overhead | 1,80,000 |
Variable cost of 10000 Units | 1,80,000 |
Variable cost per Unit | 18.00 |
Total Overhead Cost of 12500 Units | |
Amount($) | |
Variable overhead cost (12500*18) | 2,25,000 |
Fixed Overhead | 1,20,000 |
Total Overhead Cost of 12500 Units | 3,45,000 |