Question

Champion Company manufacturing overhead budget for the first quarter of 2016 contained the following data:

Variable Costs 

Indirect materials $40,000 

Indirect labor 24,000 

Utilities 20,000 

Maintenance 12,000 

Fixed Costs 

Supervisor’s salary $80,000 

Depreciation 16,000 

Property taxes 8,000 

Actual variable costs for the first quarter were: 

Indirect materials $37,200

Indirect labor 26,400 

Utilities 21,000 

Maintenance 10,600 

Actual fixed costs were as expected except for property taxes which were $9,000. All costs are considered controllable by the department manager except for the supervisor’s salary. 

Instructions Prepare a manufacturing overhead responsibility performance report for the first quarter

Answer 1

Step 1 Flexible manufacturing overhead Budget

	Budgeted	Actual	Difference { F / U }
Variable Costs
Indirect materials	$40,000	$37,200	$2,800 (F)
Indirect labor	$24,000	$26,400	$2,400 (U)
Utilities	$20,000	$21,000	$1,000 (U)
Maintenance	$12,000	$10,600	$1,400 (F)
Total Variable Cost	$96,000	$95,200	$800 (F)
Fixed Costs:
Supervisory salaries	$80,000	$80,000
Depreciation	$16,000	$16,000
Property taxes and insurance	$8,000	$9,000	$1,000 (U)
Total Fixed Cost	$104,000	$105,000	$1,000(U)
Total Cost	$200,000	$200,200	$200(U)

$$$$

Step 2 Manufacturing Overhead Responsibility Report

Controllable Costs	Budget	Actual	Difference (F/U)
Indirect materials	$40,000	$37,200	$2,800 (F)
Indirect labor	$24,000	$26,400	$2,400 (U)
Utilities	$20,000	$21,000	$1,000 (U)
Maintenance	$12,000	$10,600	$1,400 (F)
Depreciation	$16,000	$16,000	0
Property taxes	$8,000	$9,000	$1,000 (U)
Total	$120,000	$120,200	$200(U)