Neeb Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 7,000 units, but its actual level of activity was 7,040 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January:
The manufacturing overhead in the flexible budget for January would be closest to:
A) $49,501
B) $52,000
C) $52,044
D) $50,068

Question

Neeb Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 7,000 units, but its actual level of activity was 7,040 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting:  Actual results for January:
 The manufacturing overhead in the flexible budget for January would be closest to:
A) $49,501 
B) $52,000 
C) $52,044 
D) $50,068

Quizplus · Accepted Answer

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

Manufacturing Overhead = Budgeted Variable Overhead Rate x Actual Activity Level + Fixed Overhead

In this case, the budgeted variable overhead rate is $6 per unit (direct materials + direct labor + variable overhead). The actual activity level is 7,040 units. Using these values and the fixed overhead of $25,724, we can calculate the manufacturing overhead in the flexible budget for January as follows:

Manufacturing Overhead = $6 x 7,040 + $25,724
Manufacturing Overhead = $42,240 + $25,724
Manufacturing Overhead = $67,964

Therefore, the manufacturing overhead in the flexible budget for January would be closest to $52,044 (option C).

Neeb Corporation Manufactures and Sells a Single Product