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 $1.10 Indirect materials 0.70 Utilities 0.40 Fixed overhead costs per month are Supervision $4100, Depreciation $2000, and Property Taxes $500. The company believes it will normally operate in a range of 7100-12800 direct labor hours per month. Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs Indirect labor $11710 Supervision $4100 ndirect materials 7460 Depreciation 2000 Utilities 3860 Property taxes 500 (a) Prepare a flexible budget performance report, assuming that the company worked 10900 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 Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs 5900 (b) Prepare a flexible budget performance report, assuming that the company worked 10300 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 Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs

Answer 1

Actual cost is higher than Budget Cost then Difference considered as Unfavorable Variance.

Budget cost is higher than Actual Cost then Difference considered as Favorable Variance.

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended July 31, 2017
	Budget	Actual Costs	Difference
Direct Labor Hours	10,900	10,900
Variable Costs
Indirect labor (1.10*10900)	$               11,990	$             11,710	$                     280	Favorable Variance
Indirect material (0.7*10900)	$                 7,630	$               7,460	$                     170	Favorable Variance
Utilities (0.4*10900)	$                 4,360	$               3,860	$                     500	Favorable Variance
Total Variable Costs	$               23,980	$             23,030	$                     950	Favorable Variance
Fixed Costs
Supervision	$                 4,100	$               4,100	$                         0	Neither Favorable nor Unfavorable
Depreciation	$                 2,000	$               2,000	$                         0	Neither Favorable nor Unfavorable
Property Taxes	$                     500	$                   500	$                         0	Neither Favorable nor Unfavorable
Total Fixed Costs	$                 6,600	$               6,600	$                         0	Neither Favorable nor Unfavorable
Total Costs	$               30,580	$             29,630	$                     950	Favorable Variance

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended July 31, 2017
	Budget	Actual Costs	Difference
Direct Labor Hours	10,300	10,300
Variable Costs
Indirect labor (1.10*10300)	$               11,330	$             11,710	$                     380	Unfavorable Variance
Indirect material (0.7*10300)	$                 7,210	$               7,460	$                     250	Unfavorable Variance
Utilities (0.4*10300)	$                 4,120	$               3,860	$                     260	Favorable Variance
Total Variable Costs	$               22,660	$             23,030	$                     370	Unfavorable Variance
Fixed Costs
Supervision	$                 4,100	$               4,100	$                         0	Neither Favorable nor Unfavorable
Depreciation	$                 2,000	$               2,000	$                         0	Neither Favorable nor Unfavorable
Property Taxes	$                     500	$                   500	$                         0	Neither Favorable nor Unfavorable
Total Fixed Costs	$                 6,600	$               6,600	$                         0	Neither Favorable nor Unfavorable
Total Costs	$               29,260	$             29,630	$                     370	Unfavorable Variance