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In: Accounting

Dakota Enterprises static budget estimate of total overhead costs was $300,000 based on the assumption that...

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.

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Expert Solution

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

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