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		$1.10
Indirect materials		0.60
Utilities		0.40

Fixed overhead costs per month are Supervision $4,400, Depreciation $1,600, and Property Taxes $900. The company believes it will normally operate in a range of 6,500–11,300 direct labor hours per month.

Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs.
Variable Costs

Indirect labor$10,430

Indirect materials5,680

Utilities3,460

Fixed Costs

Supervision $4,400

Depreciation 1,600

Property taxes 900

(a) Prepare a flexible budget performance report, assuming that the company worked 9,700 direct labor hours during the month. (List variable costs before fixed costs.)

(b) Prepare a flexible budget performance report, assuming that the company worked 9,100 direct labor hours during the month. (List variable costs before fixed costs.)

Answer 1

Part-a :Flexible Budget , If Company Worked 9700 Direct labour Hour
Particular	Per Hour Cost	Total Amount
Labour Hour		9700
Variable cost
Indirect Labour	$1.10	$10,670.00
Indirect Material	$0.60	$5,820.00
Utilities	$0.40	$3,880.00
Total Variable Cost		$20,370.00
Fixed Cost
Supervision		$4,400.00
Depreciation		$1,600.00
Property Tax		$900.00
Total Fixed Cost		$6,900.00
Totaal Cost for 9700 DLH		$27,270.00
Part-b :Flexible Budget , If Company Worked 9100 Direct labour Hour
Particular	Per Hour Cost	Total Amount
Labour Hour		9100
Variable cost
Indirect Labour	$1.10	$10,010.00
Indirect Material	$0.60	$5,460.00
Utilities	$0.40	$3,640.00
Total Variable Cost		$19,110.00
Fixed Cost
Supervision		$4,400.00
Depreciation		$1,600.00
Property Tax		$900.00
Total Fixed Cost		$6,900.00
Total Cost for 9100 DLH		$26,010.00

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