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The master budget of Marigold Corp. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
Indirect labor $800000
Machine supplies 250000
Indirect materials 250000
Depreciation on factory building 70000
Total manufacturing overhead $1370000
A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of :_________.
a. $1630000
b. $1370000.
c. $1644000.
d. $1574000.

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Answer:

The correct answer is A.

Explanation:

First, we need to separate the fixed costs and calculate the unitary variable costs:

Fixed costs:

Depreciation on factory building= 70,000

Total unitary varaible cost:

Total cost= 800,000 + 250,000 + 250,000= $1,300,000

Unitary cost per hour= 1,300,000 / 50,000= $26

Now, the total cost for 60,000 hours:

Total cost= 26*60,000 + 70,000

Total cost= $1,630,000

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