Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2017 contai

Question

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 $14,500, indirect labor $9,200, utilities $9,600, and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,600. 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 $36,800 Indirect labor 11,000 Depreciation 7,000 Utilities 7,000 Property taxes and insurance 7,200 Maintenance 5,600 Maintenance 4,700

Explanation / Answer

CHUBBS INC.

CHUBBS INC.

Manufacturing Overhead Flexible Budget Report For the Quarter Ended March 31, 2017 Difference Favorable Budget Actual Unfavorable Neither Favorable nor Unfavorable Variable Cost Indirect Material 11600 14500 -2900 Unfavourable Indirect labor 11000 9200 1800 Favourable Utilties 7000 9600 -2600 Unfavourable Maintenance 5600 4900 700 Favourable Total Variable cost 35200 38200 -3000 Unfavourable Fixed cost Supervisory Salaries 36800 36800 0 Neither Favorable nor Unfavorable Depreciation 7000 7000 0 Neither Favorable nor Unfavorable Property Taxes & Insurance 7200 8600 -1400 Unfavourable Maintenance 4700 4700 0 Neither Favorable nor Unfavorable Total fixed Cost 55700 57100 -1400 Unfavourable Total cost 90900 95300 -4400 Unfavourable b) Responsibility report for the First Quarter CHUBBS INC. Manufacturing Overhead Responsibility Report For the Quarter Ended March 31, 2017 Difference Favorable Controllable Costs Budget Actual Unfavorable Neither Favorable nor Unfavorable Indirect Material 11600 14500 -2900 Unfavourable Indirect labor 11000 9200 1800 Favourable Utilties 7000 9600 -2600 Unfavourable Maintenance 10300 9600 700 Favourable Supervisory salaries 36800 36800 0 Neither Favourable nor unfavourable Total 76700 79700 -3000 Unfavourable

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