A ﬂexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and ﬁxed manufacturing overhead of $120,000.The budget for 25,000 hours would reveal total overhead costs of:
A)$210,000.
B)$270,000.
C)$290,000.
D)$350,000.
E)None of the answers is correct.

Question

Quizplus · Accepted Answer

The fixed manufacturing overhead remains the same whether the company produces 15,000 or 25,000 hours. Therefore, the variable manufacturing overhead rate is $6 per hour ($90,000 divided by 15,000 hours). To find the total overhead cost for 25,000 hours, we need to multiply the total number of hours (25,000) by the variable overhead rate ($6 per hour) and then add the fixed overhead costs ($120,000).

Total overhead costs = (Variable overhead rate x Total hours) + Fixed overhead costs
Total overhead costs = ($6 x 25,000) + $120,000
Total overhead costs = $150,000 + $120,000
Total overhead costs = $270,000

Therefore, the answer is B, $270,000.

A ﬂExible Budget for 15,000 Hours Revealed Variable Manufacturing Overhead