Myers Company uses a flexible budget for manufacturing overhead based on direct

Question

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 $3,800, Depreciation $1,700, and Property Taxes $500. The company believes it will normally operate in a range of 7,400–11,600 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 10,200 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 9,700 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

a) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017 Budget Actual Costs Difference (F or U) Favourable / Unfavourable Direct Labor Hours 10200 10200 0 Variable Costs Indirect Labor 14280 14010 270 Favourable (10200*1.4) Indirect Materials 8160 8030 130 Favourable (10200*0.8) Utilities 3060 2650 410 Favourable (10200*0.3) Total Variable Costs 25500 24690 810 Fixed Costs Depreciation 1700 1700 0 Property Taxes 500 500 0 Supervision 3800 3800 0 Total Fixed Costs 6000 6000 0 Total Costs 31500 30690 810 Favourable b) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017 Budget Actual Costs Difference (F or U) Favourable / Unfavourable Direct Labor Hours 9700 9700 0 Variable Costs Indirect Labor 13580 14010 -430 Unfavourable (9700*1.4) Indirect Materials 7760 8030 -270 Unfavourable (9700*0.8) Utilities 2910 2650 260 Unfavourable (9700*0.3) Total Variable Costs 24250 24690 -440 Fixed Costs Depreciation 1700 1700 0 Property Taxes 500 500 0 Supervision 3800 3800 0 Total Fixed Costs 6000 6000 0 Total Costs 30250 30690 -440 Unfavourable

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