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		$1.10
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.)

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