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 0.80 Utilities 0.40 Fixed overhead costs per month are Supervision $4,000, Depreciation $1,300, and Property Taxes $800. The company believes it will normally operate in a range of 7,600–10,600 direct labor hours per month. Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs Indirect labor $10,330 Supervision $4,000 Indirect materials 7,540 Depreciation 1,300 Utilities 3,350 Property taxes 800

(a) Prepare a flexible budget performance report, assuming that the company worked 9,600 direct labor hours during the month. (List variable costs before fixed costs.) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020 Difference Budget Actual Costs Favorable Unfavorable Neither Favorable nor Unfavorable $ $ $ $ $ $

(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.) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020 Difference Budget Actual Costs Favorable Unfavorable Neither Favorable nor Unfavorable $ $ $ $ $ $

Answer 1

a)			Myers Company
			Flexible budget
			Budget	Actual	difference
				costs
direct labor hours			9,600	9,600
variable costs
Indirect labor		1.1	10560	10,330	230	F
indirect materials		0.8	7680	7,540	140	F
utilities		0.4	3840	3,350	490	F
total variable costs			22080	21,220	860	F
fixed cost
supervision			4,000	4,000	0	N
Depreciation			1,300	1,300	0	N
property taxes			800	800	0	N
total fixed cost			6,100	6,100	0	N
total cost			28,180	27,320	860	F
b)			Myers Company
			Budget	Actual	difference
				costs
direct labor hours			9,100	9,100
variable costs
Indirect labor		1.1	10010	10,330	320	U
indirect materials		0.8	7280	7,540	260	U
utilities		0.4	3640	3,350	290	F
total variable costs			20930	21,220	290	U
fixed cost
supervision			4,000	4,000	0	N
Depreciation			1,300	1,300	0	N
property taxes			800	800	0	N
total fixed cost			6,100	6,100	0	N
total cost			27,030	27,320	290	U