ABC has made the following predictions for amounts of manufacturing overhead costs during 2007:
Cost Amount
Factory rent $150,000
Factory utilities $90,000 + $2 per machine hour
Supervisory costs $120,000 + $5 per machine hour
Indirect materials $3 per direct labor hour
Depreciation expense $50,000

The relevant range for these costs is 40,000 through 60,000 machine hours.
Required:
a. Prepare a flexible budget for overhead costs for 40,000; 50,000; and 60,000 machine hours.


b. Assuming that Hays expects to operate at about 50,000 machine hours, calculate the predetermined overhead rate.


c. During 2007, Hays operated at a volume of 53,000 machine hours. It incurred the following costs: Factory rent, $150,000; factory utilities$204,000; supervisory costs, $381,000; indirect materials, $156,000; and depreciation expense, $52,000. Prepare a schedule that shows budgeted and actual overhead costs and that allows you to conduct a meaningful evaluation of how well the company controlled its manufacturing overhead costs during 2007.


How do go about answering these questions?