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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Flexible overhead budget

 Wiki Wiki Company has determined that the variable overhead rate is $4.50 per direct labor hour in the Fabrication Department. The normal production capacity for the Fabrication Department is 10,000 hours for the month. Fixed costs are budgeted at $60,000 for the month.

 a.    Prepare a monthly factory overhead flexible budget for 9,000, 10,000, and 11,000 hours of production.

 b.    How much overhead would be applied to production if 9,000 hours were used in the department during the month?

(a)

To determine

Flexible overhead budget:

A flexible overhead 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 input the flexible overhead budget is measured. (Example: Machine hours)

To prepare: A monthly factory overhead flexible budget of Company W.

Explanation

Company W

Monthly factory overhead cost budget- Fabrication Department

 
Direct labor hours (a) 9,000 10,000 11,000
Direct labor rate per hours (b) $ 4.5 $ 4.5 $ 4.5
  $ $ $
Variable...

(b)

To determine
The amount of overhead applied to production if 9,000 hours were used in the department.

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