The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50000 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 60000 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 50000 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 60000 machine hours would show total manufacturing overhead costs of

Quizplus · Accepted Answer

To calculate the flexible budget for 60,000 machine hours, we need to adjust the variable costs (indirect labor, machine supplies, and indirect materials) while keeping the fixed cost (depreciation on factory building) constant. The variable costs total $1,110,000 ($720,000 + $180,000 + $210,000). The variable cost per machine hour is $1,110,000 / 50,000 = $22.20. For 60,000 machine hours, the variable costs would be 60,000 * $22.20 = $1,332,000. Adding the fixed cost of $150,000 gives a total manufacturing overhead of $1,482,000.

The Master Budget of Windy Co A Flexible Budget for a Level of Activity of 60000