Ex$.15-24$: Flexible Dyerhead Budgets for Control

Johnny Lee, Inc, produces a line otsmall gasoline powiered engines that can be used in a variety of residential machines, ranging from difterent types of lawnmowers, to snowblowers, to garden too E $($such as tillers and uneedwacker$).$ The basic product line consists of three different modes, each meant to fill the needs of a differentm arket. Assume you are the cost acoountant for this company and that you have been asked by the conner of the comp any to construct a flexible budget for manuracturing support $($i$.$e$.,$ wverhead$)$ costs, which seem to be graring for this comp any fater than revenues are growing. Currently, the company uses machine hours $($MH$)$ as the tasis for assigning both varianble and fixed overhead costs to products.

Within the relevant range of outp ut$,$ you determ ine that the foll ouing fixed overhead cost per morth should orsur: engineering support, $$15,000$; insurance on the manufacturing facility, $$5,000$; p rop ertyta&es on the manufacturing facility, $$12,000$; depreciation on manufacturing equip ment, $913,600$ ; ind irect labor costs: superrieorysal aries. are budgeted at $$21,00$perMH, as follons: eledricity, $$8,00$; indirect materiak: Material $A=$$$1,00,$ Material $B=$

Data

Budgeted fived overhead costs parmons:

Engineering support $=$

Insurance$--$manufacturing facility $=$

Froperty takes$--$manufacturing facility $=$

Depreciation$--$manuhacturing facility Indireet labor:

Supervisory salaries $=$

Setup labor $=$

Materials handling $=$

$$15,000$

$$5,000$

$$12\mathrm{.}000$

$$13\mathrm{.}800$

$$14,810$

$$2\mathrm{.}400$

$$2\mathrm{.}50$

Standard variable overhead costs per machine hour $($WH$)$:

Electricity $=$

$$8\mathrm{.}00$

$$1\mathrm{.}00$

$14\mathrm{.}00$

$46\mathrm{.}00$

$$2\mathrm{.}00$

Plequirements

Frepare a flexible budget for Johnny Lee, Inc, for each of the following monthly levels of machine hours: $2.$ Generate an equation to represent, within the releyant range the manufacturing overhead eosls per month for the Johniny Lee company $($state the variable averhead cost rate to wo $(2)$ deoimal places$).$ Use your equation to estimate monthly total overhead cost for mashine hours of $3000$ to $6\mathrm{.}000,$ in increments of $500.$

Generate a graphical representation of the morithly ouerhead cest function for Johnny Lee, Inc., ower the range of $3,000-6\mathrm{.}000$ machine hours per month.