Exercise 22-4 (part level submission) Variable Costs Fixed Costs (a) THOME COMPA
ID: 2492014 • Letter: E
Question
Exercise 22-4 (part level submission)
Variable Costs
Fixed Costs
(a)
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)
Exercise 22-4 (part level submission)
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 $4,166, depreciation $1,913, and property taxes $527. The company believes it will normally operate in a range of 7,800–11,400 direct labor hours per month.
Assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.
Variable Costs
Fixed Costs
Indirect labor $11,959 Supervision $4,166 Indirect materials 9,001 Depreciation 1,913 Utilities 3,665 Property taxes 527Explanation / Answer
Actual direct labour hours = 10200 Statement showing variance report from Budget Budgeted Rate for Actual hrs Actual Amount Variance Remarks Actual Hrs Bud Rate Amount Variable Overhead Indirect labour 10,200 1.2 12,240 11,959 281 Favaourable Indirect Material 10,200 0.9 9,180 9,001 179 Favaourable Utiliites 10,200 0.4 4,080 3,665 415 Favaourable Variable Overhead Total 25,500 24,625 875 Favaourable Fixed Overhead Supervision 4,166 4,166 - Depreciation 1,913 1,913 - Property Tax 527 527 - Fixed Overhead Total 6,606 6,606 - Total Overhead 32,106 31,231 875 Favaourable
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