Question

Unit 5 Lab--Principles of Accounting II

Exercise 25-03

Coronado Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows: Indirect labor $1.10

Indirect materials 0.70

Utilities 0.40

Fixed overhead costs per month are Supervision $3,600, Depreciation $1,800, and Property Taxes $800. The company believes it will normally operate in a range of 7,700–11,000 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2020 for the expected range of activity, using increments of 1,100 direct labor hours

CORONADO COMPANY Monthly Manufacturing Overhead Flexible Budget For the Year 2020

Answer 1

CORONADO COMPANY
Monthly Manufacturing Overhead Flexible Budget
For the Year 2020
Activity Level		Amount in $
	Direct Labor Hours	7700	8800	9900	11000
Variable Costs
	Indirect Labor ($1.10)	8470	9680	10890	12100
	Indirect materials ($0.70)	5390	6160	6930	7700
	Utilities ($0.40)	3080	3520	3960	4400
	Total Variable Costs (A)	16940	19360	21780	24200
Fixed Costs
	Supervision	3600	3600	3600	3600
	Depreciation	1800	1800	1800	1800
	Property Taxes	800	800	800	800
	Total Fixed Costs (B)	6200	6200	6200	6200
Total Costs (A+B)		23140	25560	27980	30400
Working Notes:
1	Variable Costs : Variable Costs are based on labor hours worked, therefore for calculting the variable costs, rate is multiplied by the labor hours
		Rate per hour
	Indirect labor	$1.10	*	Labor hour
	Indirect materials	$0.70	*	Labor hour
	Utilities	$0.40	*	Labor hour
2	Fixed Costs: Fixed cost will remain the same irrespective of the labor hours worked.