Nasson Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,700 units, but its actual level of activity was 6,730 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August:
-The manufacturing overhead in the flexible budget for August would be closest to:
A) $55,358
B) $55,855
C) $55,076
D) $55,040

Question

Nasson Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,700 units, but its actual level of activity was 6,730 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August: 
-The manufacturing overhead in the flexible budget for August would be closest to:
A) $55,358 
B) $55,855 
C) $55,076 
D) $55,040

Quizplus · Accepted Answer

Using the formula for flexible budget manufacturing overhead (MOH) per unit:
Fixed MOH + (Variable MOH per unit x Actual activity level) = Total MOH at actual activity level

Fixed MOH = $20,800
Variable MOH per unit = ($5,550 - $4,730) / 6,700 units = $0.1224 per unit

Total MOH at actual activity level = $20,800 + ($0.1224 x 6,730) = $55,076

Therefore, the answer is C) $55,076, which is the closest to the calculated total MOH in the flexible budget.

Nasson Corporation Manufactures and Sells a Single Product