Thome Company uses a flexible budget for manufacturing overhead based on direct

Question

Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows. Fixed overhead costs per month are: Supervision $4,443, Depreciation $1,401, and Property Taxes $650. The company believes it will normally operate in a range of 8,100-1 2,300 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2014 for the expected range of activity, using increments of 1,400 direct labor hours. (List variable costs before fixed costs.)

Explanation / Answer

THOME COMPANY Monthly Manufacturing Company For the Year 2014 Direct Labor Hour 8100 9500 10900 12300 Variable Cost Indirect Labor (DLH*1) 8100 9500 10900 12300 Indirect Material (DLH*0.60) 4860 5700 6540 7380 Utilities (DLH*0.20) 1620 1900 2180 2460 Total Variable Cost 14580 17100 19620 22140 Fixed Cost Supervision 4443 4443 4443 4443 Depreciation 1401 1401 1401 1401 Property Taxes 650 650 650 650 Total Fixed Cost 6494 6494 6494 6494 Total Cost 21074 23594 26114 28634

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