Ceiling Fans by Ike's overhead budget for 2009 was as follows: 600,000 units were produced in 2009.
Direct labor cost is $18,000,000.
For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour.
In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels.
Utilities costs vary proportionally with units produced.
Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours.
The 2010 expected production is 1,200,000 units.
What will be the value for utilities costs in the 2010 overhead budget?
A) $420,000
B) $150,000
C) $300,000
D) $450,000

Question

Ceiling Fans by Ike's overhead budget for 2009 was as follows:  600,000 units were produced in 2009.
Direct labor cost is $18,000,000.
For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour.
In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels.
Utilities costs vary proportionally with units produced.
Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours.
The 2010 expected production is 1,200,000 units.
What will be the value for utilities costs in the 2010 overhead budget?
A) $420,000 
B) $150,000 
C) $300,000 
D) $450,000

Quizplus · Accepted Answer

Utilities costs vary proportionally with units produced. In 2009, 600,000 units were produced, and Ike's overhead budget was $300,000 for utilities. Since the expected production for 2010 is 1,200,000 units, the utilities cost would be expected to be twice the 2009 level, which is $300,000 x 2 = $600,000. Therefore, the answer is C) $300,000.

Ceiling Fans by Ike's Overhead Budget for 2009 Was as Follows