Problem 22-1A Fixed Overhead Costs Variable Overhead Costs $84,000 $120,000 66,0

Question

Problem 22-1A

Fixed Overhead Costs

Variable Overhead Costs

$84,000

$120,000

66,000

60,000

24,000

30,000

18,000

45,000

12,000

15,000

$204,000

$270,000

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

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

Open Show Work

Problem 22-1A

Bumblebee Company estimates that 300,000 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

Supervision

$84,000

Indirect labor

$120,000

Depreciation

66,000

Indirect materials

60,000

Insurance

24,000

Repairs

30,000

Rent

18,000

Utilities

45,000

Property taxes

12,000

Lubricants

15,000

$204,000

$270,000

It is estimated that direct labor hours worked each month will range from 20,000 to 26,000 hours.

During October, 20,000 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,000, Depreciation $5,500, Insurance $1,975, Rent $1,500, and Property taxes $1,000.

Variable overhead costs: Indirect labor $8,970, Indirect materials, $3,700, Repairs $1,960, Utilities $3,250, and Lubricants $1,240.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,000 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

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

$

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

$

(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

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFixed CostsIndirect LaborIndirect MaterialsInsuranceLubricantsProperty TaxesRentRepairsSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

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Explanation / Answer

(a) Flexible Budget

(b) Flexible budget report for October

BUMBLEBEE COMPANY Annual Budget Flexible Budget (Monthly) Direct labor hours 300000 20000 22000 24000 26000 Total Per labor Cost hour Variable overhead costs: Indirect labor 120000 0.40 8000 8800 9600 10400 Indirect material 60000 0.20 4000 4400 4800 5200 Repairs 30000 0.10 2000 2200 2400 2600 Utilities 45000 0.15 3000 3300 3600 3900 Lubricants 15000 0.05 1000 1100 1200 1300 Total variable overhead costs 270000 0.90 18000 19800 21600 23400 Fixed overhead costs : Per month Supervision 84000 7000 7000 7000 7000 7000 Depreciation 66000 5500 5500 5500 5500 5500 Insurance 24000 2000 2000 2000 2000 2000 Rent 18000 1500 1500 1500 1500 1500 Property taxes 12000 1000 1000 1000 1000 1000 Total fixed overhead costs 204000 17000 17000 17000 17000 17000 Total manufacturing overhead costs 474000 35000 36800 38600 40400

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