The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: $$\begin{array} { l r }
\text { Indirect labor } & \$ 720,000 \
\text { Machine supplies } & 180,000 \
\text { Indirect materials } & 210,000 \
\text { Depreciation on factory building } & 150,000 \
\text { Total manufacturing overhead } & \$1 , 260,000
\end{array}$$ A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of

Question

The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: $$\begin{array} { l r } 
\text { Indirect labor } & \$ 720,000 \
\text { Machine supplies } & 180,000 \
\text { Indirect materials } & 210,000 \
\text { Depreciation on factory building } & 150,000 \
\text { Total manufacturing overhead } & \$1 , 260,000
\end{array}$$ A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of

Quizplus · Accepted Answer

Indirect labor, machine supplies, and indirect materials are variable costs that change with the level of activity. Depreciation on the factory building is a fixed cost that does not change with the level of activity.At a level of activity of 60,000 machine hours, the variable manufacturing overhead costs would be:Indirect labor: $720,000 x (60,000 / 50,000) = $864,000Machine supplies: $180,000 x (60,000 / 50,000) = $216,000Indirect materials: $210,000 x (60,000 / 50,000) = $252,000The total variable manufacturing overhead costs would be $864,000 + $216,000 + $252,000 = $1,332,000.The total manufacturing overhead costs at a level of activity of 60,000 machine hours would be $1,332,000 + $150,000 = $1,482,000.

The Master Budget of Windy Co A Flexible Budget for a Level of Activity of 60,000