Webster Manufacturing uses a flexible budget for manufacturing overhead based on
ID: 2538430 • Letter: W
Question
Webster Manufacturing uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows:
Indirect labor $5.00
Indirect materials 2.50
Maintenance .50
Utilities .30
Fixed overhead costs per month are:
Supervision $1,200
Insurance 400
Property taxes 600
Depreciation 1,800
Part A: The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month.
Instructions
Prepare a flexible budget using increments of 2,000 machine hours within the activity relevant range.
Part B: During the month of August, 2016, the company incurs the following manufacturing overhead costs:
Indirect labor $28,000
Indirect materials 16,200
Maintenance 2,800
Utilities 1,700
Supervision 1,440
Insurance 400
Property taxes 600
Depreciation 1,860
Instructions
Prepare a flexible budget report, assuming that the company used 6,000 machine hours during August.
Explanation / Answer
Part A Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars 4000 Machine hours 6000 Machine hours 8000 Machine hours Variable costs: Indirect labor 20,000.00 30,000.00 40,000.00 Indirect materials 10,000.00 15,000.00 20,000.00 Maintenance 2,000.00 3,000.00 4,000.00 Utilities 1,200.00 1,800.00 2,400.00 Total variable costs 33,200.00 49,800.00 66,400.00 Fixed overhead costs : Supervision 1,200.00 1,200.00 1,200.00 Insurance 400.00 400.00 400.00 Property taxes 600.00 600.00 600.00 Depreciation 1,800.00 1,800.00 1,800.00 Total fixed overhead 4,000.00 4,000.00 4,000.00 Total costs 37,200.00 53,800.00 70,400.00 Part B Paticulars Actual Flexible Difference F or U Variable costs: Indirect labor 28,000.00 30,000.00 (2,000.00) F Indirect materials 16,200.00 15,000.00 1,200.00 U Maintenance 2,800.00 3,000.00 (200.00) F Utilities 1,700.00 1,800.00 (100.00) F Total variable costs 48,700.00 49,800.00 (1,100.00) F Fixed overhead costs : Supervision 1,440.00 1,200.00 240.00 U Insurance 400.00 400.00 - Property taxes 600.00 600.00 - Depreciation 1,860.00 1,800.00 60.00 U Total fixed overhead 4,300.00 4,000.00 300.00 U Total costs 53,000.00 53,800.00 (800.00) F
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