Question

Exercise 10-4 a-b (Video) Myers Company uses a flexible budget for manufacturing overhead based on direct...

Exercise 10-4 a-b (Video)

Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.

Indirect labor $1.10
Indirect materials 0.70
Utilities 0.40


Fixed overhead costs per month are Supervision $4,100, Depreciation $2,000, and Property Taxes $500. The company believes it will normally operate in a range of 7,100–12,800 direct labor hours per month.

Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs.

Variable Costs

Fixed Costs

Indirect labor $11,710 Supervision $4,100
Indirect materials 7,460 Depreciation 2,000
Utilities 3,860 Property taxes 500

(b) Prepare a flexible budget performance report, assuming that the company worked 10,300 direct labor hours during the month. (List variable costs before fixed costs.)

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2020

Difference

Budget

Actual Costs

Favorable
Unfavorable

Neither Favorable
nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$ $ $

UnfavorableFavorableNeither Favorable nor Unfavorable

UnfavorableFavorableNeither Favorable nor Unfavorable

FavorableUnfavorableNeither Favorable nor Unfavorable

UnfavorableFavorableNeither Favorable nor Unfavorable

FavorableUnfavorableNeither Favorable nor Unfavorable

FavorableUnfavorableNeither Favorable nor Unfavorable

FavorableUnfavorableNeither Favorable nor Unfavorable

FavorableUnfavorableNeither Favorable nor Unfavorable

$ $ $

Homework Answers

Answer #1

MYERS COMPANY

Manufacturing Overhead Flexible Budget Report

For The Month Ended July 31, 2020

Flexible budget Actual cost Difference
Direct labor hours 10,300 10,300
Variable cost:
Indirect labor $11,330 (10,300*$1.10) $11,710 $380 Unfavorable
Indirect material 7,210 (10,300*$0.70) 7,460 250 Unfavorable
Utilities 4,120 (10,300*$0.40) 3,860 260 Favorable
Total variable cost 22,660 23,030 370 Unfavorable
Fixed cost:
Supervision 4,100 4,100 0 Neither favorable nor unfavorable
Depreciation 2,000 2,000 0 Neither favorable nor unfavorable
Property taxes 500 500 0 Neither favorable nor unfavorable
Total fixed cost 6,600 6,600 0 Neither favorable nor unfavorable
Total cost $29,260 $29,630 $370 Unfavorable
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