The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours: Variable costs: Indirect labor Indirect materials Factory supplies Fixed costs: Depreciation Supervision Property taxes Total overhead costs $48,000 24,000 19,200 $38,400 69,600 36,000 $91,200 144.000 $235,200 If management prepared a flexible budget for July using 54,000 direct labor hours, what would happen to the fixed costs in the budget with 54,000 direct labor hours? Total fixed costs would increase. Total fixed costs would increase by $6,000 because that is the number that direct labor hours increased. Total fixed costs would decrease. The fixed cost amounts wouldn't change.
The July manufacturing overhead budget of Kyoto Corporation, shown below, was constructed assuming an activity level of 48,000 direct labor hours: Variable costs: Indirect labor Indirect materials Factory supplies Fixed costs: Depreciation Supervision Property taxes Total overhead costs $48,000 24,000 19,200 $38,400 69,600 36,000 $91,200 144.000 $235,200 If management prepared a flexible budget for July using 54,000 direct labor hours, what would happen to the fixed costs in the budget with 54,000 direct labor hours? Total fixed costs would increase. Total fixed costs would increase by $6,000 because that is the number that direct labor hours increased. Total fixed costs would decrease. The fixed cost amounts wouldn't change.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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