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		$1.00
Indirect materials		0.70
Utilities		0.40

Fixed overhead costs per month are Supervision $4,000, Depreciation $1,200, and Property Taxes $800. The company believes it will normally operate in a range of 7,000–10,000 direct labor hours per month.

Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$8,800		Supervision		$4,000
Indirect materials		5,800		Depreciation		1,200
Utilities		3,200		Property taxes		800

(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month. (List variable costs before fixed costs.)

Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month

Answer 1

Answer-a)-

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended
Particulars	Flexible Budget	Actual Costs	Variances	Remark
9000 Direct Labor Hours	$	$	$
Variable costs:-
Indirect labor	9000 hours*$1.00 per hour=9000	8800	200	Favorable
Indirect materials	9000 hours*$0.70 per hour=6300	5800	500	Favorable
Utilities	9000 hours*$0.40 per hour=3600	3200	400	Favorable
Total variable costs (a)	18900	17800	1100	Favorable
Fixed costs:-
Supervision	4000	4000	0	None
Depreciation	1200	1200	0	None
Property Tax	800	800	0	None
Total fixed costs (b)	6000	6000	0	None
Total cost (c=a+b)	24900	23800	1100	Favorable

MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended
Particulars	Flexible Budget	Actual Costs	Variances	Remark
8500 Direct Labor Hours	$	$	$
Variable costs:-
Indirect labor	8500 hours*$1.00 per hour=8500	8800	-300	Unfavorable
Indirect materials	8500 hours*$0.70 per hour=5950	5800	150	Favorable
Utilities	8500 hours*$0.40 per hour=3400	3200	200	Favorable
Total variable costs (a)	17850	17800	50	Favorable
Fixed costs:-
Supervision	4000	4000	0	None
Depreciation	1200	1200	0	None
Property Tax	800	800	0	None
Total fixed costs (b)	6000	6000	0	None
Total cost (c=a+b)	23850	23800	50	Favorable