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 Indirect materials Utilities $1.30 0.70 0.40 Fixed overhead costs per month are Supervision $4,500, Depreciation $1,000, and Property Taxes $700. The company believes it will normally operate in a range of 6,300-11,100 direct labor hours per month. Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs Indirect labor $12,140 Supervision $4,500 Indirect materials 6,470 Depreciation 1,000 Property 3,370 Utilities 700 taxes (a) Prepare a flexible budget performance report, assuming that the company worked 9,500 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 Favorable Unfavorable Neither Favorable Budget nor Unfavorable Actual coste

Answer 1

a.

MYERS COMPANY Manufacturing overhead Flexible Budget Report For The Month Ended July 31, 2020
			Difference Favorable Unfavorable Neither Favorable nor Unfavorable
	Budget	Actual costs
Direct labor hours	9,500	9,500
Variable costs:
Indirect labor	$12,350 (9500*$1.30)	$12,140	$210	Favorable
Indirect material	6,650 (9500*$0.70)	6,470	180	Favorable
Utilities	3,800 (9500*$0.40)	3,370	430	Favorable
Total variable cost	22,800	21,980	820	Favorable
Fixed costs:
Supervision	4,500	4,500	0	Neither favorable nor unfavorable
Depreciation	1,000	1,000	0	Neither favorable nor unfavorable
Property taxes	700	700	0	Neither favorable nor unfavorable
Total fixed costs	6,200	6,200	0	Neither favorable nor unfavorable
Total costs	$29,000	$28,180	$820	Favorable

b.

MYERS COMPANY Manufacturing overhead Flexible Budget Report For The Month Ended July 31, 2020
			Difference Favorable Unfavorable Neither Favorable nor Unfavorable
	Budget	Actual costs
Direct labor hours	8,700	8,700
Variable costs:
Indirect labor	$11,310 (8700*$1.30)	$12,140	$830	Unfavorable
Indirect material	6,090 (8700*$0.70)	6,470	380	Unfavorable
Utilities	3,480 (8700*$0.40)	3,370	110	Favorable
Total variable cost	20,880	21,980	1,100	Unfavorable
Fixed costs:
Supervision	4,500	4,500	0	Neither favorable nor unfavorable
Depreciation	1,000	1,000	0	Neither favorable nor unfavorable
Property taxes	700	700	0	Neither favorable nor unfavorable
Total fixed costs	6,200	6,200	0	Neither favorable nor unfavorable
Total costs	$27,080	$28,180	$1,100	Unfavorable