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Bonita Industries prepared a fixed budget of 75000 direct labor hours, with estimated overhead costs of $375000 for variable overhead and $90000 for fixed overhead. Bonita then prepared a flexible budget at 67000 labor hours. How much is total overhead costs at this level of activity?

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Nyctalus

Answer: $425,000

Explanation: The total overhead cost can be computed suing following formula :-

total overhead cost = fixed overhead cost + variable overhead cost

where,

fixed overhead cost = $90,000

[tex]variable\:overhead\:cost=\frac{\$375,000}{75,000\:hours}\times 67,000\:hours[/tex]

=$335,000

so,putting the values into equation we get :-

total overhead cost = $90,000 + $335,000

                                 = $425,000

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