Flexible budget for indirect labor costs

Question

Problem 1. Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows:

Variable costs (total):     
Packing supplies        $120,000
Indirect labor            $180,000
Fixed costs (total):     
Utilities                     $100,000
Rent                          $40,000
Insurance                  $20,000

At an activity level of 190,000 direct labor-hours, the flexible budget for indirect labor costs would be:

• $171,000
• $180,000
• $114,000
• $270,000

Problem 2. The North Division of the Lyman Company reported the following data for last year:

Sales                                     $900,000
Operating expenses                  700,000
Interest expense                        50,000
Tax expense                              60,000
Stockholders' equity                  250,000
Average operating assets           500,000
Minimum required rate of return       14%

The return on investment last year for the North Division was:

• 18%
• 40%
• 36%
• 80%

Problem 3. The residual income for the North Division last year was:

• $130,000
• $126,000
• $90,000
• $70,000