A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: $\begin{array}{lrlr}\text { Variable }&&\text { Fixed }\
\hline \text { Indirect materials } & \$ 90,000 & \text { Depreciation } & \$ 37,500 \
\text { Indirect labor } & 120,000 & \text { Taxes } & 7,500 \
\text { Factory supplies } & 15,000 & \text { Supervision } & 30,000
\end{array}$ A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

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Quizplus · Accepted Answer

To calculate the total manufacturing overhead costs at 90,000 machine hours, we first need to adjust the variable costs to the new activity level and then add the fixed costs, which remain unchanged. The variable costs (indirect materials, indirect labor, and factory supplies) total $225,000 at 100,000 machine hours. At 90,000 machine hours, these costs would be 90% of $225,000, which is $202,500. The fixed costs (depreciation, taxes, and supervision) total $75,000 and do not change with the activity level. Adding the adjusted variable costs ($202,500) to the fixed costs ($75,000) gives a total of $277,500.

A Company's Planned Activity Level for Next Year Is Expected