Prepare a departmental flexible overhead budget for 30,000 machine hours and for 40,000 machine hours. (10 marks) Did you treat depreciation expense as a variable or a fixed cos
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Zain, Inc., is developing flexible budgets for each department as part of its plan to use
|
Tools and supplies |
$3.00 per machine hour |
|
Maintenance |
2.50 per machine hour |
|
Power |
3.50 per machine hour |
|
Depreciation |
4.50 per machine hour |
The normal volume is 40,000 machine hours per month. The company uses a service (or usage) hours method to depreciate its fixed assets.
Instructions:
- Prepare a departmental flexible
overhead budget for 30,000 machine hours and for 40,000 machine hours. (10 marks) - Did you treat depreciation expense as a variable or a fixed cost? Defend your approach. (2 marks)
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