A Company's Planned Activity Level for Next Year Is Expected

question 131

Multiple Choice

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: $\begin{array}{lrlr}\text { Variable }&&\text { Fixed }\\\hline \text { Indirect materials } & \$ 120,000 & \text { Depreciation } & \$ 50,000 \\\text { Indirect labor } & 160,000 & \text { Taxes } & 10,000 \\\text { Factory supplies } & 20,000 & \text { Supervision } & 40,000\end{array}$ A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

• A) $270,000.
• B) $360,000.
• C) $370,000.
• D) $300,000.

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Definitions:

FMV

Fair Market Value, the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Basis

The amount of investment in something for tax purposes, used to calculate gain or loss when the property is sold.

Taxable Gain

The increase in value of an asset or investment that is subject to taxes when sold or disposed of.

Fiscal Year-End

The conclusion of a 12-month accounting period for which an organization plans its financial reports and statements.