Question

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		$1.20
Indirect materials		0.80
Utilities		0.40

Fixed overhead costs per month are Supervision $3,600, Depreciation $1,000, and Property Taxes $900. The company believes it will normally operate in a range of 8,000–13,700 direct labor hours per month.

Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$13,920		Supervision		$3,600
Indirect materials		9,320		Depreciation		1,000
Utilities		4,240		Property taxes		900

(a) Prepare a flexible budget performance report, assuming that the company worked 11,800 direct labor hours during the month. (List variable costs before fixed costs.)

MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020
						Difference
		Budget		Actual Costs		Favorable Unfavorable Neither Favorable nor Unfavorable

(b) Prepare a flexible budget performance report, assuming that the company worked 11,200 direct labor hours during the month. (List variable costs before fixed costs.)

MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020
						Difference
		Budget		Actual Costs		Favorable Unfavorable Neither Favorable nor Unfavorable

Answer 1