Bumblebee Company estimates that 388,800 direct labor hours will be worked durin

Question

Bumblebee Company estimates that 388,800 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year.

Fixed Overhead Costs

Variable Overhead Costs

$92,640

$178,848

67,200

108,864

25,920

62,208

23,160

58,320

21,240

27,216

$230,160

$435,456

It is estimated that direct labor hours worked each month will range from 27,600 to 35,700 hours.

During October, 27,600 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,720, Depreciation $5,600, Insurance $2,135, Rent $1,930, and Property taxes $1,770.

Variable overhead costs: Indirect labor $13,696, Indirect materials, $7,328, Repairs $4,376, Utilities $4,550, and Lubricants $2,272.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,700 direct labor hours over the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)

BUMBLEBEE COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
For the Year 2017

(b) Prepare a flexible budget report for October. (List variable costs before fixed costs.)

BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Fixed Overhead Costs

Variable Overhead Costs

Supervision

$92,640

Indirect labor

$178,848

Depreciation

67,200

Indirect materials

108,864

Insurance

25,920

Repairs

62,208

Rent

23,160

Utilities

58,320

Property taxes

21,240

Lubricants

27,216

$230,160

$435,456

Explanation / Answer

a)

b)

BUMBLEBEE COMPANY Packaging Department Monthly manufacturing overhead Flxible budget For the year 2017 Activity level Direct labor hours           27,600           30,300           33,000           35,700 Variable costs: Indirect labor (0.46) $      12,696 $      13,938 $      15,180 $      16,422 Indirect material (0.28) $         7,728 $         8,484 $         9,240 $         9,996 Repairs (0.16) $         4,416 $         4,848 $         5,280 $         5,712 Utillities (0.15) $         4,140 $         4,545 $         4,950 $         5,355 Lubricants (0.07) $         1,932 $         2,121 $         2,310 $         2,499 Total variable costs $      30,912 $      33,936 $      36,960 $      39,984 Fixed costs: Supervision $         7,720 $         7,720 $         7,720 $         7,720 Depreciation $         5,600 $         5,600 $         5,600 $         5,600 Insurance $         2,160 $         2,160 $         2,160 $         2,160 Rent $         1,930 $         1,930 $         1,930 $         1,930 Property taxes $         1,770 $         1,770 $         1,770 $         1,770 Total fixed costs $      19,180 $      19,180 $      19,180 $      19,180 Total costs $      50,092 $      53,116 $      56,140 $      59,164

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