The master budget of Swifty Corporation 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 $630000 Machine supplies 90000 Indirect materials 120000 Depreciation on factory building 60000 Total manufacturing overhead $900000 A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of

$1,068,000

Explanation:

The computation of the total manufacturing overhead cost should be

Total variable manufacturing overhead for 50,000 machine hours is

= Indirect labor + Machine supplies +Indirect materials

= 630,000+90,000+120,000

= $840,000

Now  

Variable manufacturing overhead per machine hour is

= Total variable manufacturing overhead cost ÷ Number of machine hours

= $840,000 ÷ 50,000

= $16.80

And,

Total variable manufacturing overhead for 60,000 machine hours

= Variable manufacturing overhead per machine hour × 60,000

= $16.80 × 60,000

= $1,008,000

Now the total manufacturing overhead cost should be  

= 1,008,000  + 60,000

= $1,068,000

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