Question

Marigold Company estimates that 372,900 direct labor hours will be worked during the coming year, 2020, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year. Fixed Overhead Costs Variable Overhead Costs Supervision Depreciation Insurance $85,440 66,240 33,720 29,280 12,480 $227,160 Indirect labor Indirect materials Repairs Utilities Lubricants $164,076 74,580 74,580 93,225 29,832 $436,293 Rent Property taxes It is estimated that direct labor hours worked each month will range from 24,700 to 31,000 hours. During October, 24,700 direct labor hours were worked and the following overhead costs were incurred. Fixed overhead costs: Supervision $7,120, Depreciation $5,520, Insurance $2,785, Rent $2,440, and Property taxes $1,040. Variable overhead costs: Indirect labor $11,888, Indirect materials, $4,570, Repairs $4,870, Utilities $6,475, and Lubricants $2,286. (a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,100 direct labor hours over the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,100 direct labor hours over the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)

(b) Prepare a flexible budget report for October. (List variable costs before fixed costs.)

Answer 1

Solution a:

N Q R Computation of standard variable overhead per direct labor hour Particulars Budgeted Cost Budgted DLH Overhead Rate Indirect Labor $164,076.00 372900 $0.44 Indirect materials $74,580.00 372900 $0.20 Repairs $74,580.00 372900 $0.20 Utilities $93,225.00 372900 $0.25 Lubricants $29,832.00 372900 $0.08 15 26 27 28 2) Sheet299 (2) Sheet470 Sheet 465 (2) Sheet203 (4) Sheet79 (7) Sheet22 (2) Sheet47 (2)

Packaging Department Monthly Manufacturing overhead flexible budget For the year 2020 24700 26800 28900 31000 Direct labor hours Variable Costs: Indirect Labor Indirect materials Repairs Utilities Lubricants $10,868.00 $4,940.00 $4,940.00 $6,175.00 $1,976.00 $11,792.00 $5,360.00 $5,360.00 $6,700.00 $2,144.00 $12,716.00 $5,780.00 $5,780.00 $7,225.00 $2,312.00 $13,640.00 $6,200.00 $6,200.00 $7,750.00 $2,480.00 14 Total variable costs $28,899.00 $31,356.00 $33,813.00 $36,270.00 Fixed Costs: Supervision Depreciation Insurance Rent Property taxes $7,120.00 $5,520.00 $2,810.00 $2,440.00 $1,040.00 $7,120.00 $5,520.00 $2,810.00 $2,440.00 $1,040.00 $7,120.00 $5,520.00 $2,810.00 $2,440.00 $1,040.00 $7,120.00 $5,520.00 $2,810.00 $2,440.00 $1,040.00 25 Total Fixed Costs Total Costs $18,930.00 $47,829.00 $18,930.00 $50,286.00 $18,930.00 $52,743.00 $18,930.00 $55,200.00 26 27 28 2) Sheet299 (2) Sheet470 Sheet 465 (2) Sheet203 (4) Sheet79 (7) Sheet22 (2) Sheet47 (2)

Solution b:

F H Ε Packaging Department Manufacturing overhead flexible budget report For the month ended October 31, 2020 Budget (24700 Actual Cost Variance hours) (24700 hours) Particulars Favorable / Unfavorable / Neither favorable nor unfavorable 36 Variable Costs: Indirect Labor Indirect materials Repairs Utilities Lubricants $10,868.00 $4,940.00 $4,940.00 $6,175.00 $1,976.00 $11,888.00 $4,570.00 $4,870.00 $6,475.00 $2,286.00 $1,020.00 Unfavorable $370.00 Favorable $70.00 Favorable $300.00 Unfavorable $310.00 unfavorable 41 Total variable costs $28,899.00 $30,089.00 $1,190.00 Unfavorable Fixed Costs: Supervision Depreciation Insurance Rent Property taxes $7,120.00 $5,520.00 $2,810.00 $2,440.00 $1,040.00 $ 7,120.00 $5,520.00 $2,785.00 $2,440.00 $1,040.00 $0.00 Neither Favorable nor Unfavorable $0.00 Neither Favorable nor Unfavorable $25.00 Favorable $0.00 Neither Favorable nor Unfavorable $0.00 Neither Favorable nor Unfavorable 48 49 50 51 Total Fixed Costs Total Costs $18,930.00 $47,829.00 $18,905.00 $48,994.00 $25.00 Favorable $1,165.00 unfavorable 52 2) Sheet299 (2) Sheet470 Sheet465 (2) Sheet203 (4) Sheet79 (7) Sheet22 (2) Sheet47 (2)