Exercise 22-10 Chubbs Inc.’s manufacturing overhead budget for the first quarter

Question

Exercise 22-10

Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2017 contained the following data.

Variable Costs

Fixed Costs

Actual variable costs were indirect materials $15,500, indirect labor $9,600, utilities $9,300, and maintenance $5,300. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,500. The actual activity level equaled the budgeted level.

All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.

(a) Prepare a manufacturing overhead flexible budget report for the first quarter. (List variable costs before fixed costs.)

CHUBBS INC.
Manufacturing Overhead Flexible Budget Report
For the Quarter Ended March 31, 2017

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

(b) Prepare a responsibility report for the first quarter.

CHUBBS INC.
Manufacturing Overhead Responsibility Report
For the Quarter Ended March 31, 2017

Difference

Controllable Costs

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Variable Costs

Fixed Costs

Indirect materials $11,600 Supervisory salaries $35,200 Indirect labor 10,000 Depreciation 7,000 Utilities 7,800 Property taxes and insurance 7,200 Maintenance 5,600 Maintenance 5,200

Explanation / Answer

(a).

Manufacturing overhead flexible budget report for the first quarter

Budget

Actual

Difference

F / U

Variable costs;

Indirect materials

$11600

$15500

($3900)

U

Indirect labor

$10000

$9600

$400

F

Utilities

$7800

$9300

($1500)

U

Maintenance

$5600

$5300

$300

F

Fixed costs;

Supervisory salaries

$35200

$35200

Nil

Neither Favorable nor Unfavorable

Depreciation

$7000

$7000

Nil

Neither Favorable nor Unfavorable

Property taxes and insurance

$7200

$8500

($1300)

U

Maintenance

$5200

$5200

Nil

Neither Favorable nor Unfavorable

Total costs

$89600

$95600

($6000)

U

(b).

Manufacturing Overhead Responsibility Report

Budget

Actual

Difference

F / U

Indirect materials

$11600

$15500

($3900)

U

Indirect labor

$10000

$9600

$400

F

Utilities

$7800

$9300

($1500)

U

Maintenance

$10800

$10500

$300

F

Supervisory salaries

$35200

$35200

Nil

Neither Favorable nor Unfavorable

Total costs

$75400

$80100

($4700)

U

Manufacturing overhead flexible budget report for the first quarter

Budget

Actual

Difference

F / U

Variable costs;

Indirect materials

$11600

$15500

($3900)

U

Indirect labor

$10000

$9600

$400

F

Utilities

$7800

$9300

($1500)

U

Maintenance

$5600

$5300

$300

F

Fixed costs;

Supervisory salaries

$35200

$35200

Nil

Neither Favorable nor Unfavorable

Depreciation

$7000

$7000

Nil

Neither Favorable nor Unfavorable

Property taxes and insurance

$7200

$8500

($1300)

U

Maintenance

$5200

$5200

Nil

Neither Favorable nor Unfavorable

Total costs

$89600

$95600

($6000)

U

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