Company Y estimates that 402,600 direct labor hours will be worked during the co

Question

Company Y estimates that 402,600 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data are computed for the year.

Fixed Overhead Costs

Variable Overhead Costs

$89,280

$169,092

73,440

80,520

26,040

40,260

21,360

60,390

22,440

40,260

$232,560

$390,522

It is estimated that direct labor hours worked each month will range from 22,800 to 32,100 hours.

During October, 22,800 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,440, Depreciation $6,120, Insurance $2,125, Rent $1,780, and Property taxes $1,870.

Variable overhead costs: Indirect labor $10,566, Indirect materials, $4,260, Repairs $2,240, Utilities $3,740, and Lubricants $2,640.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,100 direct labor hours over the relevant range for the year ending December 31, 2017. (List variable costs before fixed costs.)

BUMBLEBEE COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
For the Year 2017

(b) Prepare a flexible budget report for October. (List variable costs before fixed costs.)

BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Fixed Overhead Costs

Variable Overhead Costs

Supervision

$89,280

Indirect labor

$169,092

Depreciation

73,440

Indirect materials

80,520

Insurance

26,040

Repairs

40,260

Rent

21,360

Utilities

60,390

Property taxes

22,440

Lubricants

40,260

$232,560

$390,522

Explanation / Answer

(a)

(b)

BUMBLEBEE COMPANY, Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2017 ( in $) Items of expenses Per hour Hours Worked 22800 25900 29000 32100 Variable Overhead expenses Indirect labour 0.42 9576 10878 12180 13482 Indirect Material 0.2 4560 5180 5800 6420 Repairs 0.1 2280 2590 2900 3210 Utlities 0.15 3420 3885 4350 4815 Lubricants 0.1 2280 2590 2900 3210 Fixed expense per month Supervision 7440 7440 7440 7440 7440 depreciation 6120 6120 6120 6120 6120 Insurance 2170 2170 2170 2170 2170 Rent 1780 1780 1780 1780 1780 Property taxes 1870 1870 1870 1870 1870 Total 41496 44503 47510 50517

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