Question

Campbell Soup Company estimates that 396,000 direct labor hours will be worked during 2018 in the Mixing Department. On this basis, the following budgeted manufacturing overhead data are computed:

Variable Overhead Costs		Fixed Overhead Costs
Indirect labor	$99,000	Supervision	$138,600
Indirect materials	66,000	Depreciation	99,000
Repairs	33,000	Insurance	59,400
Utilities	26,400	Rent	79,200
Lubricants	19,800	Property taxes	19,800
	$244,200		$396,000

It is estimated that direct labor hours worked each month will range from 29,700 to 39,600 hours. During March, 29,700 direct labor hours were worked and the following overhead costs were incurred (shown in the chart below):

Variable Overhead Costs		Fixed Overhead Costs
Indirect labor	$8,400	Supervision	$11,800
Indirect materials	5,000	Depreciation	8,250
Repairs	2,600	Insurance	4,900
Utilities	2,100	Rent	6,600
Lubricants	1,500	Property taxes	1,750
	$19,600		$33,300

Instructions:

Prepare a monthly flexible manufacturing overhead budget for each increment of 3,300 direct labor hours over the relevant range for the Mixing Dept. for the year ending December 31, 2018.

Prepare a manufacturing overhead budget report for March.

Answer 1

		Monthly manufacturing overhead Flexible budget
Activity level
direct labor hours			29,700	33,000	36,300	39,600
variable expense
indirect labor			7425	8250	9075	9900
indirect materials			4950	5500	6050	6600
repairs			2475	2750	3025	3300
utilities			1980	2200	2420	2640
Lubricants			1485	1650	1815	1980
total variable cost			18315	20350	22385	24420
fixed expense
supervision			11550	11550	11550	11550
depreciation			8250	8250	8250	8250
insurance			4950	4950	4950	4950
Rent			6600	6600	6600	6600
property taxes			1650	1650	1650	1650
total fixed expense			33000	33000	33000	33000
total cost			51315	53350	55385	57420
		Manufacturing overhead Flexible budget report
			budgeted	Actual	difference
direct labor hours			29,700	29,700
variable expense
indirect labor			7425	8,400	975	U
indirect materials			4950	5,000	50	U
repairs			2475	2,600	125	U
utilities			1980	2,100	120	U
lubricants			1485	1,500	15	U
total variable cost			18315	19,600	1,285	U
fixed expense
supervision			11550	11,800	250	U
depreciation			8250	8,250	0	N
insurance			4950	4,900	50	F
Rent			6600	6,600	0	N
property taxes			1650	1,750	100	U
total fixed expense			33000	33,300	300	U
total cost			51315	52,900	1,585	U