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

Question

Thome 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 $4,373, depreciation $1,716, and property taxes $544. The company believes it will normally operate in a range of 7,300–11,800 direct labor hours per month.

Assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.

Variable Costs

Fixed Costs

Indirect labor $1.10 Indirect materials 0.90 Utilities 0.30 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.) THOME COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2014 Difference Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N) Bud Actual Costs gy Policy I 2000-2017JohnWiley8 Sons, Inc. All Rights Reserved, A Division of John Wiley & Sons, Inc

Explanation / Answer

Solution:

Flexible budget is a budget prepared at standard or budget cost by using actual activity performed by the company during the period. Hence, the amount is calculated by using actual activity 9700 Direct Labor Hour and taking Standard Cost per hour for Variable manufacturing overhead cost.

THOME COMPANY

Manufacturing Overhead Flexible Budget Report

For the Month Ended July 31, 2014

Budget

Actual

Difference

Favorable (F)

Unfaborable (U)

Neither Favorable nor Unfavorable (N)

Actual Direct Labor Hour worked

9700

9700

0

N

Variable Manufacturing Overhead Costs:

Indirect Labor

$10,670

(9700*1.10)

$11,101

$431

U

Indirect materials

$8,730

(9700*0.90

$9,113

$383

U

Utilities

$2,910

(9700*0.30)

$2,615

$295

F

Total Variable Manufacturing Overhead Costs

$22,310

$22,829

$519

U

Fixed Manufacturing Overhead Costs:

Supervision

$4,373

$4,373

$0

N

Depreciation

$1,716

$1,716

$0

N

Property taxes

$544

$544

$0

N

Total Fixed Manufacturing Overhead Cost

$6,633

$6,633

$0

N

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

THOME COMPANY

Manufacturing Overhead Flexible Budget Report

For the Month Ended July 31, 2014

Budget

Actual

Difference

Favorable (F)

Unfaborable (U)

Neither Favorable nor Unfavorable (N)

Actual Direct Labor Hour worked

9700

9700

0

N

Variable Manufacturing Overhead Costs:

Indirect Labor

$10,670

(9700*1.10)

$11,101

$431

U

Indirect materials

$8,730

(9700*0.90

$9,113

$383

U

Utilities

$2,910

(9700*0.30)

$2,615

$295

F

Total Variable Manufacturing Overhead Costs

$22,310

$22,829

$519

U

Fixed Manufacturing Overhead Costs:

Supervision

$4,373

$4,373

$0

N

Depreciation

$1,716

$1,716

$0

N

Property taxes

$544

$544

$0

N

Total Fixed Manufacturing Overhead Cost

$6,633

$6,633

$0

N

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.