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 $3,600, Depreciation $1,700, and Property Taxes $600. The company believes it will normally operate in a range of 5,600–11,000 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 9,200 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 8,400 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

Open Show Work

Indirect labor $1.00 Indirect materials 0.70 Utilities 0.30

Explanation / Answer

Solution a:

Solution b:

Myers Company Manufacturing overhead flexible budget report (9200 Direct labor hours) For the month ended July 31, 2017 Particulars Budget Actual cost Difference Favorable / Unfavorable / Neither favorable nor unfavorable Variable overhead costs: Indirect labor $9,200.00 $8,970.00 $230.00 Favorable Indirect Materials $6,440.00 $6,240.00 $200.00 Favorable Utilities $2,760.00 $2,320.00 $440.00 Favorable Total Variable overhead cost $18,400.00 $17,530.00 $870.00 Favorable Fixed overhead costs: Supervision $3,600.00 $3,600.00 $0.00 Neither Favorable nor Unfavorable Depreciation $1,700.00 $1,700.00 $0.00 Neither Favorable nor Unfavorable Property Taxes $600.00 $600.00 $0.00 Neither Favorable nor Unfavorable Total Fixed overhead cost $5,900.00 $5,900.00 $0.00 Neither Favorable nor Unfavorable Total Overhead Cost $24,300.00 $23,430.00 $870.00 Favorable

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