In the Harrelson Company, indirect labor is budgeted for $36,000 and factory supervision is budgeted for $12,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct labor hours are worked, flexible budget total for these costs is

Question

Quizplus · Accepted Answer

To calculate the flexible budget, we need to use the formula:

Flexible budget = (Actual level of activity ÷ Normal level of activity) x Budgeted amount

For indirect labor, the flexible budget is:

Flexible budget for indirect labor = (90,000 direct labor hours ÷ 80,000 direct labor hours) x $36,000
= 1.125 x $36,000
= $40,500

For factory supervision, the flexible budget is:

Flexible budget for factory supervision = (90,000 direct labor hours ÷ 80,000 direct labor hours) x $12,000
= 1.125 x $12,000
= $13,500

Therefore, the total flexible budget for these costs is:

Flexible budget total = Flexible budget for indirect labor + Flexible budget for factory supervision
= $40,500 + $13,500
= $54,000

The correct answer is C.

In the Harrelson Company, Indirect Labor Is Budgeted for $36,000