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 20,000 hours of productive capacity in the department:

Variable overhead costs:
Indirect factory labor	$180,000
Power and light	12,000
Indirect materials	64,000
Total variable overhead cost		$256,000
Fixed overhead costs:
Supervisory salaries	$ 80,000
Depreciation of plant and equipment	50,000
Insurance and property taxes	32,000
Total fixed overhead cost		162,000
Total factory overhead cost		$418,000

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 18,000, 20,000, and 22,000 hours of production. Enter all amounts as positive numbers. Round your interim computations to the nearest cent, if required.

Leno Manufacturing Company
Factory Overhead Cost Budget-Press Department
For the Month Ended November 30
Direct labor hours	18,000	20,000	22,000
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

Solution

Leno Manufacturing Company

Leno Manufacturing Company
Factory Overhead Cost Budget - Press Department
for the month ended November 30
Direct labor hours	18,000	20,000	22,000
variable overhead costs:
Indirect factory labor	$162,000	$180,000	$198,000
Power and Light	$10,800	$12,000	$13,200
Indirect Materials	$57,600	$64,000	$70,400
Total variable factory overhead	$230,400	$256,000	$281,600
Fixed factory overhead costs:
Supervisory Salaries	$80,000	$80,000	$80,000
Depreciation of plant and equipment	$50,000	$50,000	$50,000
Insurance and property taxes	$32,000	$32,000	$32,000
total fixed overhead cost	$162,000	$162,000	$162,000
Total factory overhead cost	$392,400	$418,000	$443,600

Computations:

Variable cost per hour –

1. Indirect factory labor = $180,000/20,000 = $9 per hour
2. Power and light = $12,000/20,000 = $0.60 per hour
3. Indirect materials = $64,000/20,000 = $3.20 per hour

Fixed factory overhead remain same at any level of productive capacity.

Hence, the supervisory salaries, depreciation on plant and equipment and insurance and property taxes remain constant for all levels of productive capacity.