| Company assembles all of its products in the Assembly Department. Budgeted cost for the | |
| operation of this department for the year have been set as follows: | |
| COMPANY | |
| Budget costs for Assembly Department: | |
| Variable costs: | |
| Direct materials | $900,000 |
| Direct labor | 675,000 |
| Utilities | 45,000 |
| Indirect labor | 67,500 |
| Supplies | 22,500 |
| Total variable costs | 1,710,000 |
| Fixed costs: | |
| Insurance | 8,000 |
| Supervisory Salaries | 90,000 |
| Depreciation | 160,000 |
| Equipment rental | 42,000 |
| Total fixed costs | 300,000 |
| Total budgeted costs | $2,010,000 |
| Budgeted direct labor hours | 75,000 |
| Part 3: Actual activities and costs: | |
| Actual direct labor hours worked | 73,000 |
| Standard direct labor hours allowed | 70,000 |
| Actual variable manufacturing overhead cost incurred | $124,100 |
| Actual fixed manufacturing overhead cost incurred | 301,600 |
| Since the assembly work is done mostly by hand, operating activity in this department is best | |
| measured by direct labor hours. The cost formulas used to develop the budgeted costs above are | |
| valid over a relevant range of 60,000 to 90,000 direct labor hours per year. | |
| Required: | |
| 1. Prepare a manufacturing overhead flexible budget for the Assembly Department using increments | |
| of 15,000 direct labor hours. (The company does not include direct materials and direct labor | |
| costs in the flexible budget.) | |
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