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 $1.30
Indirect materials 0.70
Utilities 0.40

Fixed overhead costs per month are Supervision $4,500, Depreciation $1,000, and Property Taxes $700. The company believes it will normally operate in a range of 6,300–11,100 direct labor hours per month.

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

Variable Costs
Fixed Costs
Indirect labor $12,140 Supervision $4,500
Indirect materials 6,470 Depreciation 1,000
Utilities 3,370 Property taxes 700

(a) Prepare a flexible budget performance report, assuming that the company worked 9,500 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
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable

(b) 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.)

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
[Entry field with correct answer]

Unfavorable
Favorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Unfavorable
Favorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]

Unfavorable
Favorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
[Entry field with incorrect answer]
[Entry field with incorrect answer]
[Entry field with correct answer]
[Entry field with correct answer]

Favorable
Unfavorable
Neither Favorable nor Unfavorable
[Entry field with correct answer]

Depreciation
Direct Labor Hours
Fixed Costs
Indirect Labor
Indirect Materials
Property Taxes
Supervision
Total Costs
Total Fixed Costs
Total Variable Costs
Utilities
Variable Costs
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]
$
[Entry field with incorrect answer]

Answer 1

(a) Flexible budget performance report, assuming that the company worked 9,500 direct labor hours during the month.

Myers Company

Flexible Budget Performance Report

For the Month ended 31 July , 2017

Description	Working	Budgeted cost on the basis of actual labour hours i.e 9500 hours ($)	Actual costs on the basis of actual labour hours i.e 9500 hours ($)	Difference (1) - (2)
Variable Cost
Indirect Labour	(9500 hours x 1.3)	12350	12140	210 (favourable)
Indirect Material	(9500 hours x 0.7)	6650	6470	180 (favourable)
Utilities	(9500 hours x 0.4)	3800	3370	430 (favourable)
Total Variable Cost		22800	21980	820 (favourable)
Fixed Cost
Supervision		4500	4500
Depriciation		1000	1000
Property taxes		700	700
Total Fixed Cost		6200	6200
Total Costs		29000	28180	820 (favourable)

(b) Flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month

Myers Company

Flexible Budget Performance Report

For the Month ended 31 July , 2017

Description	Working	Budgeted cost on the basis of actual labour hours i.e 8700 hours ($)	Actual costs on the basis of actual labour hours i.e 8700 hours ($)	Difference (1) - (2)
Variable Cost
Indirect Labour	(8700 hours x 1.3)	11310	12140	830 (unfavourable)
Indirect Material	(8700 hours x 0.7)	6090	6470	380 (unfavourable)
Utilities	(8700 hours x 0.4)	3480	3370	110 (favourable)
Total Variable Cost		20880	21980	1100 (unfavourable)
Fixed Cost
Supervision		4500	4500
Depriciation		1000	1000
Property taxes		700	700
Total Fixed Cost		6200	6200
Total Costs		27080	28180	1100 (unfavourable)