Question

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		$1.30
Indirect materials		0.80
Utilities		0.30

Fixed overhead costs per month are Supervision $4,300, Depreciation $2,000, and Property Taxes $600. The company believes it will normally operate in a range of 6,100–10,000 direct labor hours per month.

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

Variable Costs				Fixed Costs
Indirect labor		$11,050		Supervision		$4,300
Indirect materials		6,790		Depreciation		2,000
Utilities		2,180		Property taxes		600

(a) Prepare a flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month. (List variable costs before fixed costs.)

Answer 1