Question

Blue Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing...

Blue 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 $1.30
Indirect materials 0.80
Utilities 0.30

Fixed overhead costs per month are Supervision $4,300, Depreciation $2,000, and Property Taxes $600. The company believes it will normally operate in a range of 6,100–10,000 direct labor hours per month.

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

Variable Costs

Fixed Costs

Indirect labor $11,050 Supervision $4,300
Indirect materials 6,790 Depreciation 2,000
Utilities 2,180 Property taxes 600

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(a)

Prepare a flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month. (List variable costs before fixed costs.)
BLUE COMPANY
Manufacturing Overhead Flexible Budget Report

For the Month Ended July 31, 2017July 31, 2017For the Year Ended July 31, 2017

Difference

Budget

Actual Costs

Favorable/Unfavorable
Neither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

FavorableUnfavorableNeither Favorable nor Unfavorable

DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs

$

$

$

FavorableUnfavorableNeither Favorable nor Unfavorable

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Answer #1
BLUE COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Budget Actual Costs Difference
Direct Labor Hours 8700 8700
Variable Costs
Indirect labor 11310 11050 260 Favorable
Indirect materials 6960 6790 170 Favorable
Utilities 2610 2180 430 Favorable
Total Variable Costs 20880 20020 860 Favorable
Fixed Costs
Supervision 4300 4300 0 Neither Favorable nor Unfavorable
Depreciation 2000 2000 0 Neither Favorable nor Unfavorable
Property taxes 600 600 0 Neither Favorable nor Unfavorable
Total Fixed Costs 6900 6900 0 Neither Favorable nor Unfavorable
Total costs 27780 26920 860 Favorable
Workings:
Variable Costs
Indirect labor 11310 =8700*1.30
Indirect materials 6960 =8700*0.80
Utilities 2610 =8700*0.30
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