Bumblebee Company estimates that 362,200 direct labor hours will be worked durin

Question

Bumblebee Company estimates that 362,200 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

$93,840

$159,368

71,520

94,172

24,360

50,708

19,920

54,330

15,960

25,354

$225,600

$383,932

It is estimated that direct labor hours worked each month will range from 28,000 to 38,500 hours.

During October, 28,000 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,820, Depreciation $5,960, Insurance $1,985, Rent $1,660, and Property taxes $1,330.

Variable overhead costs: Indirect labor $13,310, Indirect materials, $6,940, Repairs $3,880, Utilities $4,560, and Lubricants $2,360.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,500 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

$93,840

Indirect labor

$159,368

Depreciation

71,520

Indirect materials

94,172

Insurance

24,360

Repairs

50,708

Rent

19,920

Utilities

54,330

Property taxes

15,960

Lubricants

25,354

$225,600

$383,932

Explanation / Answer

BUMBLEBEE COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2017 a) Flexible budget 3500 increase in each month (i.e.) 42000 in year Variable overheads Indirect labor    150,480 (159368/362.2*342) Indirect materials       88,920 (94172/362.2*342) Repairs       47,880 (50708/362.2*342) Utilities       51,300 (54330/362.2*342) Lubricants       23,940 (25354/362.2*342) Total variable cost 362,520 Fixed Overheads Supervision $93,840 Depreciation 71,520 Insurance 24,360 Rent 19,920 Property taxes 15,960 Total Fixed cost 225,600 TOTAL manufacturing overheads for the year 2017 $588,120 b) Prepare a flexible budget report for October. Variable overheads Budget Actuals Difference Indirect labor $12,540                           13,310 ($770) Unfavorable Indirect materials $7,410                              6,940 $470 Favorable Repairs $3,990                              3,880 $110 Favorable Utilities $4,275                              4,560 ($285) Unfavorable Lubricants $1,995                              2,360 ($365) Unfavorable Total variable cost 30,210                           31,050 ($840) Unfavorable Fixed Overheads Supervision 7,820                              7,820 $0 Neither Depreciation 5,960                              5,960 $0 Neither Insurance 2,030                              1,985 $45 Favorable Rent 1,660                              1,660 $0 Neither Property taxes 1,330                              1,330 $0 Neither Total Fixed cost 18,800 18,755 $45 Favorable Total cost for oct month $49,010 $49,805 ($795) Unfavorable

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