Question

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		$1.00
Indirect materials		0.70
Utilities		0.40

Fixed overhead costs per month are Supervision $4,200, Depreciation $1,800, and Property Taxes $600. The company believes it will normally operate in a range of 7,000–13,000 direct labor hours per month.

Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$10,760		Supervision		$4,200
Indirect materials		7,520		Depreciation		1,800
Utilities		3,950		Property taxes		600

(a) Prepare a flexible budget performance report for March, assuming that March sales were $166,500. Variable costs and their percentage relationship to sales are sales commissions 6 %, advertising 6 % , traveling 4%, and delivery 2 %. Fixed selling expenses will consist of sales salaries $35,400, Depreciation on delivery equipment $7,000, and insurance on delivery equipment $2,000. (List variable costs before fixed costs.) FALLON COMPANY Selling Expense Flexible Budget Report For the Month Ended March 31, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Sales Variable Costs 9990 Sales Commissions Advertising Travel Delivery Total Variable Costs Fixed Costs Sales Salaries Depreciation Insurance Total Fixed Costs Total Costs

Answer 1

Answer-a)-

FALLON COMPANY
Selling Expense Flexible Budget Report
For the month ended March 31,2017
Particulars	Flexible Budget	Actual Costs	Differences	Remark
	$	$	$
Variable Expenses:-
Sales commissions 6%	$166500*6%=$9990	10880	-890	Unfavorable
Advertising 6%	$166500*6%=$9990	10040	-50	Unfavorable
Travel 4%	$166500*4%=$6660	6660	0	None
Delivery 2%	$166500*2%=$3330	3410	-80	Unfavorable
Total Variable expenses (a)	29970	30990	-1020	Unfavorable
Fixed Expenses:-
Sales salaries	35400	35400	0	None
Depreciation	7000	7000	0	None
Insurance	2000	2000	0	None
Total Fixed expenses (b)	44400	44400	0	None
Total Expenses (c=a+b)	74370	75390	-1020	Unfavorable

b)-

FALLON COMPANY
Selling Expense Flexible Budget Report
For the month ended March 31,2017
Particulars	Flexible Budget	Actual Costs	Differences	Remark
	$	$	$
Variable Expenses:-
Sales commissions 6%	$175100*6%=$10506	10880	-374	Unfavorable
Advertising 6%	$175100*6%=$10506	10040	466	Favorable
Travel 4%	$175100*4%=$7004	6660	344	Favorable
Delivery 2%	$175100*2%=$3502	3410	92	Favorable
Total Variable expenses (a)	31518	30990	528	Favorable
Fixed Expenses:-
Sales salaries	35400	35400	0	None
Depreciation	7000	7000	0	None
Insurance	2000	2000	0	None
Total Fixed expenses (b)	44400	44400	0	None
Total Expenses (c=a+b)	75918	75390	528	Favorable