Atlanta Manufacturing Company makes a single product that requires one hour of labor for each unit. The budgeted output for 2016 is 35,000 units. Fixed and variable overhead cost data are as follows:

INSTRUCTIONS
1. Prepare a flexible budget for Atlanta for the year 2016. The flexible budget should show costs for production levels of 90 percent, 100 percent, and 110 percent of the expected production level of 36,000 units (36,000 hours).
2. Assume that during the year 2016, actual production was 35,000 hours. Actual costs for the year were as follows:
Indirect labor...........................$45,950
Payroll taxes..............................10,200
Indirect materials........................10,900
Utilities....................................15,000
Depreciation.............................18,000
Taxes and insurance.....................4,900
Maintenance.............................12,550
Prepare a yearly overhead performance report comparing actual costs with the budget allowance for the number of hours worked.
Analyze:
If Atlanta Manufacturing Company operates at the expected production level of 36,000 direct labor hours, what total manufacturing overhead cost can be projected per direct labor hour?

Transcribed Image Text:

Variable Element per Hour Yearly Fixed Cost Element $20,000 1,500 2400 4,800 2,400 Indirect labor Payroll taxes Indirect materials Utilities S0.75 0.35 Taxes and insurance Maintenance