Stitt Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During November, the company budgeted for 5,900 units, but its actual level of activity was 5,880 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for November:

Data used in budgeting:

Actual results for November:

-The manufacturing overhead in the flexible budget for November would be closest to:
A)$57,620
B)$56,056
C)$58,013
D)$56,080

Question

Stitt Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During November, the company budgeted for 5,900 units, but its actual level of activity was 5,880 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for November:

Data used in budgeting:

Actual results for November:

-The manufacturing overhead in the flexible budget for November would be closest to:

Data used in budgeting:

Actual results for November:

-The manufacturing overhead in the flexible budget for November would be closest to:
A)$57,620 
B)$56,056 
C)$58,013 
D)$56,080

Quizplus · Accepted Answer

The manufacturing overheads consist of fixed and variable costs. The fixed costs remain constant regardless of the level of production, whereas the variable costs vary directly with the level of production. In the flexible budget, the fixed overhead costs remain the same while the variable overhead costs are adjusted based on the level of production. Based on the given data, the fixed manufacturing overhead costs are $40,000. The variable manufacturing overhead cost per unit is $8. Therefore, for the month of November, the variable overhead cost is $8 x 2,007 units = $16,056. Adding the fixed overhead cost gives us a total of $56,056. Thus, option B is the closest answer.

Stitt Corporation Manufactures and Sells a Single Product