Delaware Corp.prepared a master budget that included $21,360 for direct materials,$33,600 for direct labor,$18,000 for variable overhead,and $46,440 for fixed overhead.Delaware Corp.planned to sell 4,000 units during the period,but actually sold 4,300 units.What would Delaware's variable overhead cost be if it used a flexible budget for the period based on actual sales?
A)$16,745
B)$18,000
C)$19,350
D)$46,440

Question

Quizplus · Accepted Answer

Variable overhead is based on the actual level of activity, which in this case is 4,300 units. To calculate the flexible budget for variable overhead, we need to multiply the variable overhead rate by the actual number of units sold. The variable overhead rate is:

Variable overhead rate = Variable overhead / Direct labor hours
Variable overhead rate = $18,000 / $33,600
Variable overhead rate = $0.5357 per direct labor hour

Since each unit requires 0.5 direct labor hours, the flexible budget for variable overhead is:

Flexible budget for variable overhead = Variable overhead rate x Actual direct labor hours
Flexible budget for variable overhead = $0.5357 x (4,300 x 0.5)
Flexible budget for variable overhead = $1,151.75

Therefore, the variable overhead cost for Delaware Corp. using a flexible budget based on actual sales would be $1,151.75. The closest choice is C ($19,350), which is the correct answer.