Myers Company uses a flexible budget for manufacturing overhead based on direct

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 $4,300, Depreciation $1,900, and Property Taxes $500. The company believes it will normally operate in a range of 6,400–9,400 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 8,400 direct labor hours during the month. (List variable costs before fixed costs.)

(b) Prepare a flexible budget performance report, assuming that the company worked 7,800 direct labor hours during the month. (List variable costs before fixed costs.)

Indirect labor $1.30 Indirect materials 0.90 Utilities 0.40 MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs

Explanation / Answer

a) Flexible Budget Performance Report, Assuming that the company worked 8400 direct labor hours

during the month.

b) Flexible Budget Performance Report, Assuming that the company worked 7800 direct labor hours

during the month.

Particulars Budgeted Actual Costs F / U Direct Labor Hours 8400 H Variable Costs :- Indirect Labor(8400*$1.30) $10920 $10670 250 F Indirect Materials(8400*$0.90) $7560 $7450 110 F Utilities(8400*$0.40) $3360 $2950 410 F Total Variable Costs (A) $21840 $21070 770 F Fixed Costs :- Supervision $4300 $4300 Depreciation $1900 $1900 Property Taxes $500 $500 Total Fixed Costs (B) $6700 $6700 Total Cost (A+B) $28540 $27770 770 F

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