Question

Exercise 22-4

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		$1.00
Indirect materials		0.70
Utilities		0.40

Fixed overhead costs per month are Supervision $4,200, Depreciation $1,800, and Property Taxes $600. The company believes it will normally operate in a range of 7,000–13,000 direct labor hours per month.

Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$10,760		Supervision		$4,200
Indirect materials		7,520		Depreciation		1,800
Utilities		3,950		Property taxes		600

(a) Prepare a flexible budget performance report, assuming that the company worked 11,000 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, 2017 Difference Favorable Unfavorable Neither Favorable Budget Actual Costs nor Unfavorable

Answer 1

a
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
	Budget	Actual costs
Direct labor hours	11000	11000
Variable costs
Indirect labor	11000	10760	240	Favorable
Indirect materials	7700	7520	180	Favorable
Utilities	4400	3950	450	Favorable
Total variable cost	23100	22230	870	Favorable
Fixed costs
Supervision	4200	4200	0	Neither Favorable nor unfavorable
Depreciation	1800	1800	0	Neither Favorable nor unfavorable
Property taxes	600	600	0	Neither Favorable nor unfavorable
Total fixed costs	6600	6600	0	Neither Favorable nor unfavorable
Total costs	29700	28830	870	Favorable
b
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
	Budget	Actual costs
Direct labor hours	10300	10300
Variable costs
Indirect labor	10300	10760	460	Unfavorable
Indirect materials	7210	7520	310	Unfavorable
Utilities	4120	3950	170	Favorable
Total variable cost	21630	22230	600	Unfavorable
Fixed costs
Supervision	4200	4200	0	Neither Favorable nor unfavorable
Depreciation	1800	1800	0	Neither Favorable nor unfavorable
Property taxes	600	600	0	Neither Favorable nor unfavorable
Total fixed costs	6600	6600	0	Neither Favorable nor unfavorable
Total costs	28230	28830	600	Unfavorable