Myers Company uses a flexible budget for manufacturing overhead based on direct
ID: 2492278 • Letter: M
Question
Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
Fixed overhead costs per month are Supervision $4,400, Depreciation $1,600, and Property Taxes $900. The company believes it will normally operate in a range of 6,500–11,300 direct labor hours per month.
Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.
Variable Costs
Fixed Costs
(a) Prepare a flexible budget performance report, assuming that the company worked 9,700 direct labor hours during the month. (List variable costs before fixed costs.)
MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
(b) Prepare a flexible budget performance report, assuming that the company worked 9,100 direct labor hours during the month. (List variable costs before fixed costs.)
MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
Explanation / Answer
Requirement a:
Flexible Budget Performance Report (9700 direct labor hours):
Particulars
Budget
Actual
Difference
Effect
Indirect Labor
$10670 (1.1*9700)
$10430
$240
Favorable
Indirect Materials
$5820 (0.6*9700)
$5680
$140
Favorable
Utilities
$3880 (0.4 * 9700)
$3460
$420
Favorable
Property Taxes
$900
$900
Nil
Neither Favorable nor unfavorable
Supervision
$4400
$4400
Nil
Neither Favorable nor unfavorable
Depreciation
$1600
$1600
Nil
Neither Favorable nor unfavorable
Total Costs
$27270
$26470
$800
Favorable
Total Fixed Costs
$6900
$6900
Nil
Neither Favorable nor unfavorable
Total Variable Costs
$20370
$19570
$800
Favorable
Requirement b:
Flexible Budget Performance Report (9100 direct labor hours):
Particulars
Budget
Actual
Difference
Effect
Indirect Labor
$10010 (1.1*9100)
$10430
$420
Unfavorable
Indirect Materials
$5460 (0.6*9100)
$5680
$220
Unfavorable
Utilities
$3640 (0.4 * 9100)
$3460
$180
Favorable
Property Taxes
$900
$900
Nil
Neither Favorable nor unfavorable
Supervision
$4400
$4400
Nil
Neither Favorable nor unfavorable
Depreciation
$1600
$1600
Nil
Neither Favorable nor unfavorable
Total Costs
$26010
$26470
$460
Unfavorable
Total Fixed Costs
$6900
$6900
Nil
Neither Favorable nor unfavorable
Total Variable Costs
$19110
$19570
$460
Unfavorable
Particulars
Budget
Actual
Difference
Effect
Indirect Labor
$10670 (1.1*9700)
$10430
$240
Favorable
Indirect Materials
$5820 (0.6*9700)
$5680
$140
Favorable
Utilities
$3880 (0.4 * 9700)
$3460
$420
Favorable
Property Taxes
$900
$900
Nil
Neither Favorable nor unfavorable
Supervision
$4400
$4400
Nil
Neither Favorable nor unfavorable
Depreciation
$1600
$1600
Nil
Neither Favorable nor unfavorable
Total Costs
$27270
$26470
$800
Favorable
Total Fixed Costs
$6900
$6900
Nil
Neither Favorable nor unfavorable
Total Variable Costs
$20370
$19570
$800
Favorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.