Managerial Accounting - Online Chapter 10 Data concerning manufacturing overhead
ID: 2466635 • Letter: M
Question
Managerial Accounting - Online
Chapter 10
Data concerning manufacturing overhead for the Barkley Company are presented below. The Mixing Department is the cost center.
An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and 50% of the supervisory costs are the only fixed costs that are controllable at the department level.
The flexible budget formula and the cost and activity for the months of July and August are as follows:
Flexible Budget Per
Direct Labor Hour
Actual Costs
Actual Costs
July
August
Direct labor hours
6,000
7,000
Overhead costs
Variable
Indirect materials
$3.50
$20,500
$25,100
Indirect labor
6.00
39,500
40,700
Factory supplies
1.00
9,600
8,200
Fixed
Depreciation
$20,000
$15,000
$15,000
Supervision
20,000
18,000
20,900
Property taxes
5,000
12,000
12,000
Total costs
$114,600
$121,900
Instructions:
(a) Prepare the responsibility reports for the Mixing Department for each month.
(b) Comment on the manager's performance in controlling costs during the two month period.
Flexible Budget Per
Direct Labor Hour
Actual Costs
Actual Costs
July
August
Direct labor hours
6,000
7,000
Overhead costs
Variable
Indirect materials
$3.50
$20,500
$25,100
Indirect labor
6.00
39,500
40,700
Factory supplies
1.00
9,600
8,200
Fixed
Depreciation
$20,000
$15,000
$15,000
Supervision
20,000
18,000
20,900
Property taxes
5,000
12,000
12,000
Total costs
$114,600
$121,900
Explanation / Answer
Barkley Company Responsibility Report Mixing Department for the month of July & August Month -July Month -August Details Cost formula per direct labor hour Flexible Overhead Budget Actual Result Variance Fav (F)/Unfavorable (U) Flexible Overhead Budget Actual Result Variance Fav (F)/Unfavorable (U) Direct Labor Hours 6,000 6,000 7,000 7,000 Overhead Costs Variable Indirect Materials 3.50 21,000 20,500 500 F 24,500 25,100 600.0 U Indirect Labor 6.00 36,000 39,500 3,500 U 42,000 40,700 1,300.0 F Factory Supplies 1.00 6,000 9,600 3,600 U 7,000 8,200 1,200.0 U Total Variable cost 63,000 69,600 6,600 U 73,500 74,000 500.0 U Fixed 50% of Supervision cost 10,000.0 10,000 9,000 1,000 F 10,000 10,450 450.0 U Total Cost 73,000 78,600 5,600 U 83,500 84,450 950.0 U
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