Question 1 Myers Company uses a flexible budget for manufacturing overhead based

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Question 1 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. Indirect labor Indirect materials Utilities $1.00 0.70 0.30 Fixed overhead costs per month are Supervision $3,600, Depreciation $1,700, and Property Taxes $600. The company believes it will normally operate in a range of 5,600-11,000 direct labor hours per month Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs. Variable Costs Fixed Costs $8,970 Supervision Indirect labor Indirect materials Utilities 6,240 Depreciation 2,320 Property taxes $3,600 1,700 600 (a) Prepare a flexible budget performance report, assuming that the company worked 9,200 direct labor hours during the month. (List variable costs before fixed costs.)

Explanation / Answer

Manufacturing Overhead Flexible Budget Report Budget Actual Difference Direct labor hours 9200 9200 Variable costs: Indirect labor 9200 8970 230 Favorable Indirect materials 6440 6240 200 Favorable Utilities 2760 2320 440 Favorable Total variable costs 18400 17530 870 Favorable Fixed costs: Supervision 3600 3600 0 Neither Favorable nor unfavorable Depreciation 1700 1700 0 Neither Favorable nor unfavorable Property taxes 600 600 0 Neither Favorable nor unfavorable Total fixed costs 5900 5900 0 Neither Favorable nor unfavorable Total costs 24300 23430 870 Favorable b Budget Actual Difference Direct labor hours 8400 8400 Variable costs: Indirect labor 8400 8970 570 Unfavorable Indirect materials 5880 6240 360 Unfavorable Utilities 2520 2320 -200 Unfavorable Total variable costs 16800 17530 730 Unfavorable Fixed costs: Supervision 3600 3600 0 Neither Favorable nor unfavorable Depreciation 1700 1700 0 Neither Favorable nor unfavorable Property taxes 600 600 0 Neither Favorable nor unfavorable Total fixed costs 5900 5900 0 Neither Favorable nor unfavorable Total costs 22700 23430 730 Unfavorable

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