Buffaloe Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 5,200 units, but its actual level of activity was 5,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August:
-The manufacturing overhead in the flexible budget for August would be closest to:
A) $53,919
B) $55,525
C) $52,896
D) $55,460

Question

Buffaloe Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 5,200 units, but its actual level of activity was 5,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August: 
-The manufacturing overhead in the flexible budget for August would be closest to:
A) $53,919 
B) $55,525 
C) $52,896 
D) $55,460

Quizplus · Accepted Answer

Manufacturing overhead per unit = Budgeted manufacturing overhead costs ÷ Budgeted units
Manufacturing overhead per unit = $286,200 ÷ 5,200 = $55.0962 ≈ $55.10

Flexible budget:
Manufacturing overhead = (Manufacturing overhead per unit × Actual units produced)
Manufacturing overhead = ($55.10 × 5,250) = $289,275

Therefore, the closest answer is B) $55,525.

Buffaloe Corporation Manufactures and Sells a Single Product