E8-1 Twyla Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
Prepare flexible manufacturing overhead budget.
E8-1 Twyla Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
Indirect labor
|
$1.00
|
Indirect materials
|
0.60
|
Utilities
|
0.40
|
Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500, and property Taxes $800. The company believes it will normally operate in a range of 7,000-10,000 direct labor hours per month.
Instructions
Prepare a monthly flexible manufacturing overhead budget for 2005 for the expected range of activity, using increments of 1,000 direct labor hours.
SOLUTION PREVIEW
Should
the current machine be replaced?
Retain Replace
Net Income
Machine Machine
Increase (Decrease)
Operating costs $120,000(1) $ 90,000(2) $30,000
New machine cost 0 25,000 (25,000)
