Question

Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing...

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 0.60
Utilities 0.40


Fixed overhead costs per month are Supervision $3,900, Depreciation $1,200, and Property Taxes $500. The company believes it will normally operate in a range of 7,400–11,300 direct labor hours per month.

Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs

Fixed Costs

Indirect labor $10,730 Supervision $3,900
Indirect materials 5,840 Depreciation 1,200
Utilities 3,530 Property taxes 500


(a) Prepare a flexible budget performance report, assuming that the company worked 10,000 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, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable

Neither Favorable
nor Unfavorable

(b) Prepare a flexible budget performance report, assuming that the company worked 9,400 direct labor hours during the month. (List variable costs before fixed costs.)

Homework Answers

Answer #1

--Requirement [a]

Manufacturing Overhead Flexible Budget Report
For the month ended Jul 31, 2017
Budget Actual cost Difference F/U/Neither F nor U
Direct labor hours 10000 10000
Variable costs:
Indirect Labor $11,000 $10,730 $270 Favourable
Indirect material $6,000 $5,840 $160 Favourable
Utilities $4,000 $3,530 $470 Favourable
Total Variable cost $21,000 $20,100 $900 Favourable
Fixed costs:
Supervision $3,900 $3,900 $0 Neither Favourable nor Unfavourable
Depreciation $1,200 $1,200 $0 Neither Favourable nor Unfavourable
Property Taxes $500 $500 $0 Neither Favourable nor Unfavourable
Total Fixed cost $5,600 $5,600 $0 Neither Favourable nor Unfavourable
Total manufacturing overhead $26,600 $25,700 $900 Favourable
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