Company assembles all of its products in the Assembly Department. Budgeted cost for the operation of this department for the year have been set as follows:
| COMPANY |
|
|
| Budget costs for Assembly Department: |
|
| Variable costs: |
|
| Direct materials |
$900,000 |
| Direct labor |
675,000 |
| Utilities |
45,000 |
| Indirect labor |
67,500 |
| Supplies |
22,500 |
| Total variable costs |
1,710,000 |
|
|
| Fixed costs: |
|
| Insurance |
8,000 |
| Supervisory Salaries |
90,000 |
| Depreciation |
160,000 |
| Equipment rental |
42,000 |
| Total fixed costs |
300,000 |
| Total budgeted costs |
$2,010,000 |
| Budgeted direct labor-hours |
75,000 |
|
|
| Part 3: Actual activities and costs: |
|
| Actual direct labor-hours worked |
73,000 |
| Standard direct labor-hours allowed |
70,000 |
| Actual variable manufacturing overhead cost incurred |
$124,100 |
| Actual fixed manufacturing overhead cost incurred |
301,600 |
Since the assembly work is done mostly by hand, operating activity in this department is best measured by direct labor-hours. The cost formulas used to develop the budgeted costs above are valid over a relevant range of 60,000 to 90,000 direct labor-hours per year.
Required:
1. Prepare a manufacturing overhead flexible budget for the Assembly Department using increments of 15,000 direct labor-hours. (The company does not include direct materials and direct labor costs in the flexible budget.)