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.
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.
(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.)
|(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.)|
|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|
|Total Variable cost||$21,000||$20,100||$900||Favourable|
|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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