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Managerial Accounting

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Creating an Operational Budget for Crutches

MGRACT-ENWYYL

Caremark Corp's master budget was based on a level of activity of producing and selling 70,000 crutches with a retail price of \$80 per set. The company has the capacity to produce 90,000 units. Variable labor costs were budgeted to be \$1,400,000. Variable material costs were budgeted to be \$896,000 and variable overhead costs were budgeted to be \$1,456,000. Actual overhead costs incurred were \$1,600,200 on 75,000 units produced and sold.

What should the flexible budget variable overhead cost be under the new activity level?

A

$1,560,000

B

$2,000,000

C

$1,875,400

D

$2,200,400