Bumblebee Company estimates that 300,000 direct labor hours will be worked durin
ID: 2455172 • Letter: B
Question
Bumblebee Company estimates that 300,000 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year.
Fixed Overhead Costs
Variable Overhead Costs
$96,000
$126,000
72,000
90,000
30,000
69,000
24,000
72,000
18,000
18,000
$240,000
$375,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.
During October, 27,000 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: Supervision $8,000, Depreciation $6,000, Insurance $2,460, Rent $2,000, and Property taxes $1,500.
Variable overhead costs: Indirect labor $12,432, Indirect materials, $7,680, Repairs $6,100, Utilities $6,840, and Lubricants $1,920.
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor hours over the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)
BUMBLEBEE COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
For the Year 2017
(b) Prepare a flexible budget report for October. (List variable costs before fixed costs.)
BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
Fixed Overhead Costs
Variable Overhead Costs
Supervision$96,000
Indirect labor$126,000
Depreciation72,000
Indirect materials90,000
Insurance30,000
Repairs69,000
Rent24,000
Utilities72,000
Property taxes18,000
Lubricants18,000
$240,000
$375,000
Explanation / Answer
a) Flexible budget 3000 increase in each month (i.e.) 36000 in year Variable overheads Indirect labor $141,120 (126000/300*336) Indirect materials 100,800 (90000/300*336) Repairs 77,280 (69000/300*336) Utilities 80,640 (72000/300*336) Lubricants 20,160 (18000/300*336) Total variable cost 420,000 Fixed Overheads Supervision $107,520 Depreciation 80,640 Insurance 33,600 Rent 26,880 Property taxes 20,160 Total Fixed cost 268,800 TOTAL manufacturing overheads for the year 2017 $688,800 b) Prepare a flexible budget report for October. Variable overheads Budget Actuals Difference Indirect labor $11,760 12,432 ($672) Unfavorable Indirect materials $8,400 7,680 $720 Favorable Repairs $6,440 6,100 $340 Favorable Utilities $6,720 6,840 ($120) Unfavorable Lubricants $1,680 1,920 ($240) Unfavorable Total variable cost 35,000 34,972 $28 Favorable Fixed Overheads Supervision 8,960 8,000 $960 Favorable Depreciation 6,720 6,000 $720 Favorable Insurance 2,800 2,460 $340 Favorable Rent 2,240 2,000 $240 Favorable Property taxes 1,680 1,500 $180 Favorable Total Fixed cost 22,400 19,960 $2,440 Favorable Total cost for oct month $57,400 $54,932 $2,468 Favorable
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