Exercise 22-4 Variable Costs Fixed Costs THOME COMPANY Manufacturing Overhead Fl

Question

Exercise 22-4

Variable Costs

Fixed Costs

THOME COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2014

Difference

Budget

Actual Costs

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

THOME COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2014

Difference

Budget

Actual Costs

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

Open Show Work

Exercise 22-4

Thome 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 $1.20 Indirect materials 0.90 Utilities 0.40
Fixed overhead costs per month are supervision $3,506, depreciation $1,893, and property taxes $710. The company believes it will normally operate in a range of 6,800–11,600 direct labor hours per month.

Assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.

Variable Costs

Fixed Costs

Indirect labor $11,744 Supervision $3,506 Indirect materials 8,822 Depreciation 1,893 Utilities 3,516 Property taxes 710

Explanation / Answer

2. When determining which programs should receive greater or smaller reductions in their budgets, administrators must make judgments about which programs can be cut with the least harm to central purposes of the university.

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