The Finishing Department of Paragon Manufacturing Co. prepared the following factory overhead cost budget for October of the current year, during which it expected to operate at a 100% capacity of 10,000 machine hours:
- Variable cost:
- Indirect factory wages $18,000
- Power and light 12,000
- Indirect materials 4,000
- Total variable cost $34,000
- Fixed cost:
- Supervisory salaries $12,000
- Depreciation of plant and
- equipment 8,800
- Insurance and property taxes 3,200
- Total fixed cost 24,000
- Total factory overhead $58,000
During October, the plant was operated for 9,000 machine hours and the factory overhead costs incurred were as follows: indirect factory wages, $16,400; power and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of plant and equipment, $8,800; insurance and property taxes, $3,200.