Exercise 24-4 Myers Company uses a flexible budget for manufacturing overhead ba
ID: 2480260 • Letter: E
Question
Exercise 24-4
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
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
For the Year 2014
Activity Level
Direct Labor Hours
7000
8000
9000
10000
Variable Costs
Indirect Labor
7000
8000
9000
10000
Indirect Material
4200
4800
5400
6000
Utilities
2800
3200
3600
4000
Total Variable Costs
14000
16000
18000
20000
Fixed Costs
Supervision
4000
4000
4000
4000
Depreciation
1200
1200
1200
1200
Property Taxes
800
800
800
800
Total Fixed Costs
6000
6000
6000
6000
Total Costs
20000
22000
24000
26000
Notes:
1) Variable Costs will change with the change in units produced.
2) Fixed Costs will remain constant irrespective of changes in units produced.
Thanks.
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
For the Year 2014
Activity Level
Direct Labor Hours
7000
8000
9000
10000
Variable Costs
Indirect Labor
7000
8000
9000
10000
Indirect Material
4200
4800
5400
6000
Utilities
2800
3200
3600
4000
Total Variable Costs
14000
16000
18000
20000
Fixed Costs
Supervision
4000
4000
4000
4000
Depreciation
1200
1200
1200
1200
Property Taxes
800
800
800
800
Total Fixed Costs
6000
6000
6000
6000
Total Costs
20000
22000
24000
26000
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