Exercise 10-4 Myers Company uses a flexible budget for manufacturing overhead ba
ID: 2478793 • Letter: E
Question
Exercise 10-4
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.
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 2017, Myers Company incurs the following manufacturing overhead costs.
Variable Costs
Fixed Costs
(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.)
MYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 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
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
Explanation / Answer
At 9000 hours At 8500 Hours Variable cost per hour Budget Actual Variance Budget Actual Variance Variable cost Indirect labor 1 9000 [9000*1] 8800 200 F 8500 [8500*1] 8800 300 U Indirect material .70 6300 [9000*.7] 5800 500 F 5950 [8500*.7] 5800 150 F Utilities .40 3600 [9000*.40] 3200 400 F 3400 [8500*.4] 3200 200 F Total variable cost 18900 17800 1100 F 17850 17800 50 F Fixed cost supervisor 4000 4000 N 4000 4000 N Depreciation 1200 1200 N 1200 1200 N Taxes 800 800 N 800 800 N Total fixed cost 6000 6000 N 6000 6000 N Total cost 24900 23800 1100F 23850 23800 50F
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