Raney Company uses a flexible budget for manufacturing overhead that is based on direct labour hours. The

Question:

Raney Company uses a flexible budget for manufacturing overhead that is based on direct labour hours. The variable manufacturing overhead costs per direct labour hour are as follows:

Indirect labour............................$0.70

Indirect materials.........................$0.50

Utilities....................................$0.40

Fixed overhead costs per month are as follows: supervision $4,000; depreciation $1,500; and property taxes $800. The company believes it will normally operate in a range of 7,000 to 10,000 direct labour hours per month.

Instructions

Prepare a monthly flexible manufacturing overhead budget for 2016 for the expected range of activity, using increments of 1,000 direct labour hours.

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