Exhibit 18-6 The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours:

- Refer to Exhibit 18-6. If management prepared a flexible budget for July using 52,000 direct labor hours, what amount would this flexible budget show for total overhead costs?

Question

Exhibit 18-6 The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours:

- Refer to Exhibit 18-6. If management prepared a flexible budget for July using 52,000 direct labor hours, what amount would this flexible budget show for total overhead costs?

Quizplus · Accepted Answer

To prepare a flexible budget for 52,000 direct labor hours, we need to use the variable overhead rate and fixed overhead amount per the July manufacturing overhead budget. The variable overhead rate is calculated as $2.00 per direct labor hour ($96,000 ÷ 48,000 direct labor hours), so for 52,000 direct labor hours, the variable overhead costs would be $2.00 × 52,000 = $104,000. The fixed overhead amount remains the same at $138,800. Therefore, the total overhead costs in the flexible budget would be $104,000 + $138,800 = $242,800. Thus, the correct answer is option C.

Exhibit 18-6 the July Manufacturing Overhead Budget of Kyoto Corporation