Question

Concord 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 $1.10 0.60 0.40 Fixed overhead costs per month are Supervision $4,200, Depreciation $1,500, and Property Taxes $700. The company believes it will normally operate in a range of 6,700-9,700 direct labor hours per month. Assume that in July 2020, Concord Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs Indirect labor $9,370 Supervision $4,200 Indirect materials 5,040 Depreciation 1,500 Utilities 3,050 Property taxes 700 (a) Prepare a flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month. (List variable costs before fixed costs.)

Answer 1

Answer -

Concord Company
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2020
	Budget costs	Actual costs	Difference [Favorable F / Unfavorable U]
Direct labor hours	8700	8700
Variable costs:
Indirect labor	$9570	$9370	$200	F
Indirect materials	$5220	$5040	$180	F
Utilities	$3480	$3050	$430	F
Total variable costs	$18270	$17460	$810	F
Fixed costs:
Supervision	$4200	$4200
Depreciation	$1500	$1500
Property taxes	$700	$700
Total fixed costs	$6400	$6400
Total costs	$24670	$23860	$810	F

Calculation:

As per given information

Variable manufacturing overhead costs for per direct labor hour:

Indirect materials = $1.10 per direct labor hour

Indirect labor = $0.60 per direct labor hour

Utilities = $0.40 per direct labor hour

So,

Budget costs (for 8700 direct labor hours):

Indirect materials = $1.10 * 8700 direct labor hours = $9570

Indirect labor = $0.60 * 8700 direct labor hours = $5220

Utilities = $0.40 * 8700 direct labor hours = $3480