Problem 10-1A Bumblebee Company estimates that 392,900 direct labor hours will b

Question

Problem 10-1A

Bumblebee Company estimates that 392,900 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

$90,600

$188,592

70,680

110,012

27,960

70,722

27,000

78,580

21,840

19,645

$238,080

$467,551

It is estimated that direct labor hours worked each month will range from 20,900 to 28,100 hours.

During October, 20,900 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,550, Depreciation $5,890, Insurance $2,280, Rent $2,250, and Property taxes $1,820.

Variable overhead costs: Indirect labor $11,132, Indirect materials, $5,462, Repairs $3,722, Utilities $4,440, and Lubricants $1,445.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,400 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

$90,600

Indirect labor

$188,592

Depreciation

70,680

Indirect materials

110,012

Insurance

27,960

Repairs

70,722

Rent

27,000

Utilities

78,580

Property taxes

21,840

Lubricants

19,645

$238,080

$467,551

Explanation / Answer

BUMBLEBEE COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2017 a) Flexible budget 2400 increase in each month (i.e.) 28800 in year Variable overheads Indirect labor 134208 (188592/392.9*279.6) Indirect materials 78288 (110012/392.9*279.6) Repairs 50328 (70722/392.9*279.6) Utilities 55920 (78580/392.9*279.6) Lubricants 13980 (19645/392.9*279.6) Total variable cost 332,724 Fixed Overheads Supervision $90,600 Depreciation 70,680 Insurance 27,960 Rent 27,000 Property taxes 21,840 Total Fixed cost 238,080 TOTAL manufacturing overheads for the year 2017 $570,804 b) Prepare a flexible budget report for October. Variable overheads Budget Actuals Difference Indirect labor $11,184                               11,131 $53 Favorable Indirect materials $6,524                                 5,462 $1,062 Favorable Repairs $4,194                                 3,722 $472 Favorable Utilities $4,660                                 4,440 $220 Unfavorable Lubricants $1,165                                 1,445 ($280) Unfavorable Total variable cost 27,727                               26,200 $1,527 Unfavorable Fixed Overheads Supervision 7,550                                 7,550 $0 Neither Depreciation 5,890                                 5,890 $0 Neither Insurance 2,330                                 2,280 $50 Favorable Rent 2,250                                 2,250 $0 Neither Property taxes 1,820                                 1,820 $0 Neither Total Fixed cost 19,840 19,790 $50 Favorable Total cost for oct month $47,567 $45,990 $1,577 Favorable

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