Q1] A Company developed its annual manufacturing overhead budget for its master budget for 2019 as follows:

120,000 Direct

Expected annual operating capacity Labor Hours

Variable overhead costs

Indirect labor $ 480,000

Indirect materials 90,000

Factory supplies 60,000

Total variable costs 630,000

Fixed overhead costs

Depreciation 180,000

Supervision 144,000

Property taxes 96,000

Total fixed costs 420,000

Total costs $1,050,000

The relevant range for monthly activity is expected to be between 8,000 and 12,000 DLH.

Instructions

Prepare flexible budget for a monthly activity level of 8,000 and 9,000 direct labor hours.

Q2] A Company uses flexible budgeting to control manufacturing overhead. The budget below was prepared for the month ending June 30, 2003.

Direct Labor Hours

12,000 15,000 18,000

Indirect materials $36,000 $45,000 $54,000

Indirect labor 9,000 11,250 13,500

Utilities 6,000 7,500 9,000

Total variable costs 51,600 63,700 76,500

Rent 10,000 10,000 10,000

Depreciation 8,000 8,000 8,000

Insurance 5,500 5,500 5,500

Total fixed costs 23,500 23,500 23,500

Total costs $74,500 $87,250 $100,000

During the month of MAY, 16,200 direct labor hours were worked and the following costs were incurred:

Indirect materials $49,200

Indirect labor 11,980

Utilities 7,800

Rent 10,000

Depreciation 8,200

Insurance 5,620

Instructions

a. Prepare flexible budget at the 16,200 direct labor hour level of activity.

b. Prepare manufacturing overhead budget at the 16,200 direct labor hour level of activity