The Farmington Company has a flexible budget based on direct labor hours.At the 100,000 hours level, the budget shows the following variable overhead costs: Indirect materials $\quad$$ 16,000
Indirect labor $\quad$$\quad$$ 44,000 At an activity level of 120,000 hours, total variable costs will be:
A)$19,200
B)$60,000
C)$52,800
D)$72,000

Question

Quizplus · Accepted Answer

Variable costs change in proportion to the activity level. At 120,000 hours, which is 20% more than 100,000 hours, the costs will increase by 20%. The total variable costs at 100,000 hours are $16,000 + $44,000 = $60,000. Increasing this by 20% gives $60,000 * 1.2 = $72,000.

The Farmington Company Has a Flexible Budget Based on Direct \quad

The Farmington Company Has a Flexible Budget Based on Direct $\quad$