Flexible Budget Application The cutting department of Liberty Manufacturing Comp

Question

Flexible Budget Application
The cutting department of Liberty Manufacturing Company operated during September 2016 with the following manufacturing overhead cost budget based on 6,000 hours of monthly productive capacity:

The cutting department was operated for 5,580 hours during September and incurred the following manufacturing overhead costs:

Using a flexible budgeting approach, prepare a performance report for the cutting department for September 2016, comparing actual overhead costs with budgeted overhead costs for 5,580 hours. Separate overhead costs into variable and fixed components and show the amounts of any variances between actual and budgeted amounts.

Do not use negative signs with your answers below.
Do not round until your final answer. Round answers to nearest whole number, if applicable.
Select either U for Unfavorable or F for Favorable using the drop down box next to each of your variance answers.

Budget

(5,580 hours)

Liberty Manufacturing Company
Cutting Department
Overhead Budget (6,000 Hours)
For the Month of September 2016 Variable costs:    Factory supplies $48,000    Indirect labor 72,000    Utilities (usage charge) 36,000    Patent royalties on secret process 144,000         Total variable overhead $300,000 Fixed costs:    Supervisory salaries 96,000    Depreciation on factory equipment 140,000    Factory taxes 40,000    Factory insurance 24,000    Utilities (base charge) 32,000          Total fixed overhead 332,000 Total manufacturing overhead $632,000

Explanation / Answer

Budget

(5,580 hours)

*($48,000/6,000) ×5580

**(72000/6000)×5580

***(36,000/6000)×5580

****(144,000/6000)×5580

Liberty Manufacturing Company
Polishing Department
Performance Report - Manufacturing Overhead
For the Month Ended September 30, 2016 Actual Costs

Budget

(5,580 hours)

Variances Variable costs:     Factory supplies $41,400 $44,640* $3,240 F     Indirect labor $68,200 $66,960** $1,240 U     Utilities $38,100 $33,480*** $4,620 U     Patent royalties $135,000 $133,920**** $1,080 U         Total variable overhead $282,700 $279,000 $3,700 U Fixed costs:     Supervisory salaries $96,000 $96000 0     Depreciation on equipment $140,000 $140,000 0     Factory taxes $44,400 40,000 $4,400 U     Factory insurance $27,000 $24,000 $3,000 U     Utilities $32,000 $32,000 0         Total fixed overhead $339,400 $332,000 $7,400 U Total overhead costs $622,100 $611,000 $11,100 U

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