Question

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
		$		$		$

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