Question

Please explain what you did in detail.

Exercise 14-3 Monty 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 $1.40 0.60 0.40 Fixed overhead costs per month are Supervision $3,900, Depreciation $1,700, and Property Taxes $600. The company believes it will normally operate in a range of 8,200-13,300 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,700 direct labor hours. (List variable costs before fixed costs.) MONTY COMPANY Monthly Manufacturing Overhead Flexible Budget

Answer 1

Preparation of Flexible budget is as follows:-

Flexible Budget Activity Level Direct labor hours Variable manufacturing overhead costs: Indirect labor ($1.40 labor hours) Indirect materials ($0.60* labor hours) Utilities ($0.40 labor hours) Total Variable overhead cost Fixed overhead costs: 9,900 11,600 8,200 13,300 $ 16,240.00 $ 11,480.00 $ 13,860.00 $ 18,620.00 $ 6,960.00 $ 4,920.00 $ 5,940.00 $ 7,980.00 $ 3,280.00 $ 3,960.00 $ 4,640.00 $ 5,320.00 19,680.00 $ 27,840.00 $ 23,760.00 $ 31,920.00 $ 3,900.00 $ 3,900.00 $ 3,900.00 $ Supervision 3,900.00 $ 1,700.00 $ 600.00 $ 1,700.00 $ 1,700.00 $ 1,700.00 Depreciation Property Tax Total Fixed overhead cost 600.00 S 600.00 $ 600.00 $ 6,200.00 $ 6,200.00 $ 6,200.00 $ 6,200.00 Total Costs 25,880.00 $ 34,040.00 $ 29,960.00 $ 38,120.00

Here Variable manufacturing overhead costs are calculated using the different labor hours with the per hour cost while fixed costs remain the same for each activity level.