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 $1.00 0.50 0.20 Fixed overhead costs per month are Supervision $3,500, Depreciation $1,000, and Property Taxes $500. The company believes it will normally operate in a range of 5,500-8,500 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,000 direct labor hours. (List variable costs before fixed costs.) MYERS COMPANY Monthly Manufacturing Overhead Flexible Budget For the Year 2017

Answer 1

Ans.	MYERS   COMPANY
	Monthly Manufacturing Overhead Flexible Budget
	For the Year 2017
	Activity level
	Direct labor hours	5500	6500	7500	8500
	Variable costs:
	Indirect materials	$5,500	$6,500	$7,500	$8,500
	Indirect labor	$2,750	$3,250	$3,750	$4,250
	Utilities	$1,100	$1,300	$1,500	$1,700
	Total variable overhead costs (a)	$9,350	$11,050	$12,750	$14,450
	Fixed costs:
	Supervision	$3,500	$3,500	$3,500	$3,500
	Depreciation	$1,000	$1,000	$1,000	$1,000
	Property taxes	$500	$500	$500	$500
	Total fixed overhead costs (b)	$5,000	$5,000	$5,000	$5,000
	Total Manufacturing overhead (a + b)	$14,350	$16,050	$17,750	$19,450
	*Calculations for Total direct labor hours:
		Direct labor hours
	Direct labor hours	5500	(5500 + 1000=6500)	(6500+1000=7500)	(7500+1000=8500)
	*Calculations for Variable costs:    (Variable cost per direct labor hour * Total direct labor hours)
	Direct labor hours	5500	6500	7500	8500
	Variable costs:
	Indirect materials	$1 * 5,500	$1 * 6,500	$1 * 7,500	$1 * 8,500
	Indirect labor	$0.50 * 5,500	$0.50 * 6,500	$0.50 * 7,500	$0.50 * 8,500
	Utilities	$0.20 * 5,500	$0.20 * 6,500	$0.20 * 7,500	$0.20 * 8,500
	*Fixed overhead costs always remain same.