P11-50B Oakley Company estimates that 360,000 direct labour hours will be worked
ID: 2572763 • Letter: P
Question
P11-50B Oakley Company estimates that 360,000 direct labour hours will be worked in the packaging department during 2016. Based on that, it has calculated the following budgeted manufacturing overhead cost data for the year (SO 2, 3) Prepare a flexible budget and budget report for manufactur ing overhead. Fixed Overhead Costs Variable Overhcad Costs Supervision Depreciation Insurance Rent Property taxes $ 90,000 60,000 30,000 24,000 18,000 $222,000 Indirect labour Indirect materials Repairs Utilities Lubricants $126,000 90,000 54,000 72,000 18,000 $360,000 Problems: Set B 493 The company estimates that the direct labour hours worked each month will range from 27,000 to 36,000 hours. During 1. Fixed overhead costs-supervision $7,500; depreciation $5,000; insurance $2,470; rent $2,000; and property taxes 2. Variable overhead costs-indirect labour $10,360; indirect materials $6,400; repairs $4,000; utilities $5,700; and October, 27,000 direct labour hours were worked and the following overhead costs were incurred $1,500 lubricants $1,640 Instructions (a) Prepare a monthly flexible manufacturing overhead budget for each increment of 3,000 direct labour hours over the (a) Total costs: 27,000 relevant range for the year ending December 31, 2016 (b) Prepare a flexible budget report for October (c) CComment on management's efficiency in controlling manufacturing overhead costs in October DLH, $45,500; and 36,000 DLH, $54,500 (b) Total S1,070 UExplanation / Answer
a.
b.
c. Management should focus on controlling the variable costs. Indirect labor is greater than budgeted costs. Hence the efficiency is lacking.
Activity level: Direct labor hours 27000 30000 33000 36000 Variable costs: Indirect labor $9450 $10500 $11550 $12600 Indirect materials 6750 7500 8250 9000 Repairs 4050 4500 4950 5400 Utilities 5400 6000 6600 7200 Lubricants 1350 1500 1650 1800 Total variable costs $27000 $30000 $33000 $36000 Fixed costs: Supervision $7500 $7500 $7500 $7500 Depreciation 5000 5000 5000 5000 Insurance 2500 2500 2500 2500 Rent 2000 2000 2000 2000 Property taxes 1500 1500 1500 1500 Total fixed costs $18500 $18500 $18500 $18500 Total costs $45500 $48500 $51500 $54500Related Questions
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