The production manager at Landis Corp. has the following information available about some of the costs in her department. Her department produces only one product, and she has determined that machine hours are the best predictor of costs.
Indirect labor wages (all variable)............................... $529,200 at 135,000 MHs
Rent............................................................................ 14,500 per month
Factory insurance................................................................. 1,680 per month
Indirect material (all variable) ............................................. 351,000 at 135,000 MHs
Supervisory salaries............................................................. 8,260 per month
Depreciation.......................................................................... 4,150 per month
Electricity............................................................................ 680 per month plus
............................................................................................ $0.42 per MH
Required:
(a) Prepare a flexible budget at the following activity levels: (1) 120,000 MHs; (2) 130,000 MHs; and (3) 150,000 MHs.
(b) What would be the variable and fixed predetermined overhead rates at each activity level in the flexible budget? Do these rates differ at different levels? Explain.