Exercise 24-4 Myers Company uses a flexible budget for manufacturing overhead ba

Question

Exercise 24-4 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. Indirect labor Indirect materials Utilities 1.00 0.70 0.30 Fixed overhead costs per month are Supervision $3,600, Depreciation $1,700, and Property Taxes $600 hours per month. The company believes it will normally operate in a range of 5,600 11,000 direct labor Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs $8,970 Supervision Indirect labor Indirect materials Utilities 6,240 Depreciation 2,320 Property taxes 3,600 1,700 600 (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.)

Explanation / Answer

Ans.1 MYERS COMPANY Manufacturing overhead Flexible Budget Report For the Month Ended July 31, 2017 Particulars Budget Actual Variance Fav./Unf. Direct labor hours 9200 9200 Variable costs: Indirect labor 9200 8970 230 F Indirect materials 6440 6240 200 F Utilities 2760 2320 440 F Total variable costs (A) 18400 17530 870 F Fixed costs: Supervision 3600 3600 0 no effect Depreciation 1700 1700 0 no effect Property taxes 600 600 0 no effect Total fixed costs (B) 5900 5900 0 no effect Total costs (A+B) 24300 23430 870 F *Calculation of budgeted variable cost: (9200 hours) Variable costs: Indirect labor (9200*1) Indirect materials (9200*0.70) Utilities (9200*0.30) Ans.2 MYERS COMPANY Manufacturing overhead Flexible Budget Report For the Month Ended July 31, 2017 Particulars Budget Actual Variance Fav./Unf. Direct labor hours 8400 8400 Variable costs: Indirect labor 8400 8970 570 U Indirect materials 5880 6240 360 U Utilities 2520 2320 200 F Total variable costs (A) 16800 17530 730 U Fixed costs: Supervision 3600 3600 0 no effect Depreciation 1700 1700 0 no effect Property taxes 600 600 0 no effect Total fixed costs (B) 5900 5900 0 no effect Total costs (A+B) 22700 23430 730 U *Calculation of budgeted variable cost: (8400 hours) Variable costs: Indirect labor (8400*1) Indirect materials (8400*0.70) Utilities (8400*0.30) *Increase in cost from budgeted to actual   =   Unfavorable *Decrease in cost from budgeted to actual   =   Favorable

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