Calculate Flexible Budget For Factory Overhead

Question

YumTown Frozen Foods is an emerging company in the market of high-end TV dinners. YumTown's postion takes on popular favorites such as steak and potatoes and macaroni and cheese have gained significant attention on cable food channels. However, as YumTown's level of activity has risen, the company has struggled to make sense of its manufacturing costs. Representatives have asked you to analyze the company's factory overhead costs and labor hours. YumTown accumulates the following data concerning a mixed cost by relating total factory overhead costs to direct labor hours.

As an HR Manager, human resource planning analyzes the data to make decisions on when to add additional employees in contrast to adding hours to current employees and this is impacted by changes both the fixed and variable costs. Hence HR planners are responsible for carefully exploring headcount and costs per employee and headcount relative to resources and overhead. For this reason, variance analysis is a valuable tool for human resource planning and forecasting.

Month

DLH

Factory Overhead

March

300

$2,400

April

400

$3,000

May

600

$3,600

June

790

$4,500

July

500

$3,200

August

800

$4,900

What is the flexible budget formula for factory overhead? As a HR manager, how might you make use of this information in the decisions being made about employee headcount - including hiring and staffing choices.

 

Summary

The question belongs to Accounting and it discusses about calculating factory overhead and a flexible budget formula for it and how to use this information to make decisions regarding employee headcount.

Total Word Count 254

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