Montgomery Company has developed the following flexible budget formulas for its four overhead items: Overhead item Fixed Cost Variable rate per direct labor hour Maintenance $10,000 $ 3.00 Power $ 1,500 $ 0.30 Indirect labor cost $12.00 Equipment lease $ 7,000 Total $18,500 $15.30 Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year 19,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance $14,000 Power $ 2,200 Indirect labor cost $70,000 Equipment lease $ 7,000 Total costs $93,200 The total budgeted overhead for an expected activity level of 10,000 units is:
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Montgomery Company has developed the following flexible budget formulas for its four overhead items:
| Overhead item | Fixed Cost | Variable rate per direct labor hour |
| Maintenance | $10,000 | $ 3.00 |
| Power | $ 1,500 | $ 0.30 |
| Indirect labor cost | | $12.00 |
| Equipment lease | $ 7,000 | |
| Total | $18,500 | $15.30 |
Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year 19,000 units were produced with the following actual costs:
| Overhead item | Actual costs |
| Maintenance | $14,000 |
| Power | $ 2,200 |
| Indirect labor cost | $70,000 |
| Equipment lease | $ 7,000 |
| Total costs | $93,200 |
The total budgeted overhead for an expected activity level of 10,000 units is:
Total budgeted overhead is calculated as total of fixed Expenses and variable expenses.
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