A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:Variable Fixed Indirect materials $120,000 Depreciation $50,000Indirect labor 160,000 Taxes 10,000Factory supplies 20,000 Supervision 40,000Required:If a flexible budget is prepared at the 90,000 machine hours level of activity, what would be the total manufacturing overhead costs?

At Activity level 90,000 machine hours Total Manufacturing Overheads $ 360,000

At Activity level  100,000 machine hours Total Manufacturing Overheads $400,000

Explanation:

At Activity level  100,000 machine hours

Variable Fixed

Indirect materials $120,000

Depreciation $50,000

Indirect labor 160,000

Taxes 10,000

Factory supplies 20,000

Supervision 40,000

Total Manufacturing Overheads $400,000

We divide the total overheads with the total machine hours and multiply it with the 90,000 machine hours to get the overheads at this activity level.

At Activity level 90,000 machine hours

Indirect materials ($120,000/100,000 )*90,000 = $ 108,000

Depreciation ($50,000/100,000 )*90,000 = $ 45,000

Indirect labor (160,000 /100,000 )*90,000 = $ 144,000

Taxes (10,000/100,000 )*90,000 = $ 9,000

Factory supplies (20,000 /100,000 )*90,000 = $ 18,000

Supervision (40,000/100,000 )*90,000 = $ 36,000

Total Manufacturing Overheads $ 360,000

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