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7 March, 06:23

Corrington Manufacturing Company prepared a fixed budget of 80,000 direct labor hours, with estimated overhead costs of $400,000 for variable overhead and $120,000 for fixed o verhead. Corrington then prepared a flexible budget at 78,000 labor hours. How much is total overhead costs at this level of activity

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  1. 7 March, 06:37
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    Total Overhead Cost is $ 510,000 for 78,000 direct labor hours

    Explanation:

    Corrington Manufacturing Company

    Fixed Budget 80,000 direct labor hours

    Variable Overhead $400,000

    Fixed Overhead $120,000

    Flexible Budget 78,000 direct labor hours

    Variable Over head = $ 400,000 / 80,000 * 78,000 = $ 390,000

    Fixed Overhead $120,000

    Total Overhead Cost is $ 510,000 for 78,000 direct labor hours

    First we divide the variable overhead with the budgeted number of direct labor hours and then multiply it with the flexible labour hours to get the variable overhead at this activity level. The fixed overhead does not change.
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