# Flexible overhead budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 20,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $160,000 Power and light 12,000 Indirect materials 64,000 Total variable overhead cost$256,000 Fixed overhead cost: Supervisory salaries $80,000 Depreciation of plant and equipment 50,000 Insurance and property taxes 32,000 Total fixed overhead cost 162,000 Total factory overhead cost$418,000 Assuming that the estimated costs for November are the same as for October, prepare a flexible factory overhead cost budget for the Press Department for November for 18,000, 20,000, and 22,000 hours of production.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 23, Problem 23.15EX
Textbook Problem

## Flexible overhead budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 20,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $160,000 Power and light 12,000 Indirect materials 64,000 Total variable overhead cost$256,000 Fixed overhead cost: Supervisory salaries $80,000 Depreciation of plant and equipment 50,000 Insurance and property taxes 32,000 Total fixed overhead cost 162,000 Total factory overhead cost$418,000  Assuming that the estimated costs for November are the same as for October, prepare a flexible factory overhead cost budget for the Press Department for November for 18,000, 20,000, and 22,000 hours of production.

Expert Solution
To determine

A flexible overhead cost budget is referred as a thorough plan for controlling the overhead cost, and is valid for the firm’s relevant range of activity. Based on the standard inputs, the flexible overhead cost budget is measured. (Example: Machine hours)

To prepare: A flexible factory overhead cost budget for the press department for the month of November for 18,000, 20,000, and 22,000 hours of production.

### Explanation of Solution

Prepare the July manufacturing standard cost budget for Company GB assuming planned production.

 Company LM              Factory Overhead Cost Budget–Department P                           For the month ended November 30 Direct labor hours 18,000 20,000 22,000 Variable overhead costs: Indirect factory labor    (1) $162,000$180,000 $198,000 Power and light (2) 10,800 12,000 13,200 Indirect materials (3) 57,600 64,000 70,400 Total variable factory overhead cost$230,400 $256,000$281,600 Fixed factory overhead costs: Supervisory salaries $80,000$  80,000 $80,000 Depreciation of plant and equipment 50,000 50,000 50,000 Insurance and property taxes 32,000 32,000 32,000 Total fixed factory overhead cost$162,000 $162,000$162,000 Total factory overhead cost $392,400$418,000 $443,600 Table (1) Working notes: Calculate indirect factory labor for 18,000 direct labor hours. (Indirect factory laborfor 18,000 hours) = Indirect factory labor for 20,000 hours20,000direct labor hours×18,000hours=$180,00020,000hours×18,000 hours=$162,000 Calculate indirect factory labor for 22,000 direct labor hours. (Indirect factory laborfor 22,000 hours) = Indirect factory labor for 20,000 hours20,000direct labor hours×22,000hours=$180,00020,000hours×22,000 hours=\$198,000 (1)

Calculate power and light for 18,000 direct labor hours

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