Exercise 22-4 Thome Company uses a flexible budget for manufacturing overhead ba

Question

Exercise 22-4 Thome 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 $1.20 0.90 0.30 Fixed overhead costs per month are supervision $4,320, depreciation $1,323, and property taxes $865. The company believes it will normally operate in a range of 5,700-9,000 direct labor hours per month. Assume that in July 2014, Thome Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs Indirect labor Indirect materials Utilities $4,320 1,323 865 $9,251 Supervision 6,920 Depreciation 1,885 Property taxes

Explanation / Answer

Budget Actual Difference Direct labor hours 7900 7900 Variable costs: Indirect labor 9480 9251 229 F Indirect materials 7110 6920 190 F Utilities 2370 1885 485 F Total variable costs 18960 18056 904 F Fixed costs Supervision 4320 4320 0 N Depreciation 1323 1323 0 N Property taxes 865 865 0 N Total fixed costs 6508 6508 0 N Total costs 25468 24564 904 F Budget Actual Difference Direct labor hours 7300 7300 Variable costs: Indirect labor 8760 9251 491 U Indirect materials 6570 6920 350 U Utilities 2190 1885 305 F Total variable costs 17520 18056 536 U Fixed costs Supervision 4320 4320 0 N Depreciation 1323 1323 0 N Property taxes 865 865 0 N Total fixed costs 6508 6508 0 N Total costs 24028 24564 536 U

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