Question

Bumblebee Company estimates that 366,700 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year. Fixed Overhead Costs Supervision Depreciation Insurance Rent Property taxes $90,000 75,240 31,320 27,000 13,200 $236,760 Variable Overhead Costs Indirect labor $168,682 Indirect materials 102,676 Repairs 73,340 Utilities 55,005 Lubricants 18,335 $418,038 It is estimated that direct labor hours worked each month will range from 29,200 to 39,700 hours. During October, 29,200 direct labor hours were worked and the following overhead costs were incurred. Fixed overhead costs: Supervision $7,500, Depreciation $6,270, Insurance $2,585, Rent $2,250, and Property taxes $1,100. Variable overhead costs: Indirect labor $14,472, Indirect materials, $7,796, Repairs $5,800, Utilities $4,820, and Lubricants $1,850. (a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,500 direct labor hours over the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)

Answer 1

Answer a.

39700 BUMBLEBEE COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2017 Activity Level Direct labor hours 29200 32700 36200 Variable Costs Indirect labor 13432 15042 16652 Indirect materials 8176 9156 10136 Repairs 5840 6540 7240 Utilities 4380 4905 5430 Lubricants 1460 1635 1810 Total Variable Costs 33288 37278 41268 Fixed Costs Supervision ($90,000 / 12) 7500 7500 7500 Depreciation ($75,240 / 12) 6270 6270 6270 Insurance ($31,320/12) 2610 2610 2610 Rent ($27,000/12) 2250 2250 2250 Property Taxes ($13,200/12) 1100 1100 1100 Total Fixed Costs 19730 19730 19730 Total Costs 53018 57008 60998 18262 11116 7940 5955 1985 45258 7500 6270 2610 2250 1100 19730 64988

Planning Budget:

Direct labor hours = 366,700

Indirect labor = $168,682
Indirect labor per direct labor hour = $168,682 / 366,700
Indirect labor per direct labor hour = $0.46

Indirect materials = $102,676
Indirect materials per direct labor hour = $102,676 / 366,700
Indirect materials per direct labor hour = $0.28

Repairs = $73,340
Repairs per direct labor hour = $73,340 / 366,700
Repairs per direct labor hour = $0.20

Utilities = $55,005
Utilities per direct labor hour = $55,005 / 366,700
Utilities per direct labor hour = $0.15

Lubricants = $18,335
Lubricants per direct labor hour = $18,335 / 366,700
Lubricants per direct labor hour = $0.05

Answer b.

BUMBLEBEE COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2017 Budget Actual 29200 29200 Difference 13432 8176 5840 4380 1460 14472 7796 5800 4820 1850 34738 1040 380 40 440 390 1450 Unfavorable Favorable Favorable Unfavorable Unfavorable Unfavorable 33288 Direct labor hours Variable Costs Indirect labor Indirect materials Repairs Utilities Lubricants Total Variable Costs Fixed Costs Supervision Depreciation Insurance Rent Property Taxes Total Fixed Costs Total Costs 7500 6270 7500 6270 2610 2250 1100 19730 53018 2585 2250 1100 19705 54443 Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Favorable Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Favorable Unfavorable 1425