The following budget information relates to General Motors Company.
Variable manufacturing overhead costs per machine hour are as follows
Expected annual operating capacity 120,000 Direct Labor Hours
Variable overhead costs
Indirect labor $310,000
Indirect materials 100,000
Factory supplies 34,000
Total variable 444,000
Fixed overhead costs
Depreciation 170,000
Supervision 120,000
Property taxes 96,000
Total fixed 386,000
Total costs $830,000
The relevant range for monthly activity is expected to be between 9,000 and 11,000 direct labor hours.
Instructions
General Motors would like a flexible manufacturing overhead budget
prepared based on machine hours. Given the range of activity above,
Prepare the budget using increments of 1,000 machine hours.
Working notes:
Computation of variable overhead cost per machine hour:
Variable overhead cost per machine hour = variable overhead cost / total expected annual machine hours
Indirect labor = $310,000 / 120,000 = $2.583
Indirect material = $100,000 / 120,000 = $0.833
Factory supplies = $34,000 / 120,000 = $0.283
General Motors
Flexible Manufacturing Overhead Budget
| Activity level | |||
| Machine hours | 9,000 | 10,000 | 11,000 |
| Variable cost: | |||
| Indirect labor ($2.583) | $ 23,247 | $ 25,830 | $ 28,413 |
| Indirect material ($0.833) | 7,497 | 8,330 | 9,163 |
| Factory supplies ($0.283) | 2,547 | 2,830 | 3,113 |
| Total variable cost | 33,291 | 36,990 | 40,689 |
| Fixed cost: | |||
| Depreciation ($170,000 / 12) | 14,167 | 14,167 | 14,167 |
| Supervision ($120,000 / 12) | 10,000 | 10,000 | 10,000 |
| Property taxes ($96,000 / 12) | 8,000 | 8,000 | 8,000 |
| Total fixed cost | 32,167 | 32,167 | 32,167 |
| Total cost | $ 65,458 | $ 69,157 | $ 72,856 |
The following budget information relates to General Motors Company. Variable manufacturing overhead costs per machine hour...