Franklin Industries i hour are as follows Indirect labor Indirect materials Utli

Question

Franklin Industries i hour are as follows Indirect labor Indirect materials Utlities implements a flexble budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor $1.00 70 40 Fixed costs per month are (lor the range 7,000 to 10,000 direct labor hours) Supervisor Depreciation Property taxes REQUIRED: S 4,000 1,200 800 Prepare a flexible budget performance report if the company operated at 8,000 direct labor hours and incurred the following costs in August 2018 Indirect labor Indirect materials Utilities S 8,910 5,840 3,120 The fixed costs were the same as budgeted except for Property taxes, $875 actual.

Explanation / Answer

The flexible budget performance report is shown as follows:-

Franklin Industries

Manufacturing Overhead Flexible Budget Report

For the Month Ended August 31, 2018 (Amounts in $)

Favorable

Unfavorable

Neither Favorable nor Unfavorable

Working Notes:-

1) The variable cost for budget of 8,000 labor hours is calculated as follows

Indirect Labor = 8,000 hrs*$1.00 per hour = $8,000

Indirect Materials = 8,000 hours*$0.70 per hr = $5,600

Utilities = 8,000 hours*$0.40 per hr = $3,200

2) The amounts in brackets shows negative amounts.

Particulars Budget (A) Actual Costs (B) Difference (A-B)

Favorable

Unfavorable

Neither Favorable nor Unfavorable

Direct Labor Hours 8,000 8,000 Variable Costs Indirect Labor 8,000 8,910 (910) Unfavorable Indirect Materials 5,600 5,840 (240) Unfavorable Utilities 3,200 3,120 80 Favorable Total Variable Costs 16,800 17,870 (1,070) Unfavorable Fixed Costs Supervisor 4,000 4,000 0 Neither Favorable nor Unfavorable Depreciation 1,200 1,200 0 Neither Favorable nor Unfavorable Property Taxes 800 875 (75) Unfavorable Total Fixed Costs 6,000 6,075 (75) Unfavorable Total Costs 22,800 23,945 (1,145) Unfavorable

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