Question

Exercise 10-4 a-b (Video)

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		$1.10
Indirect materials		0.70
Utilities		0.40

Fixed overhead costs per month are Supervision $4,100, Depreciation $2,000, and Property Taxes $500. The company believes it will normally operate in a range of 7,100–12,800 direct labor hours per month.

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

Variable Costs				Fixed Costs
Indirect labor		$11,710		Supervision		$4,100
Indirect materials		7,460		Depreciation		2,000
Utilities		3,860		Property taxes		500

(a) Prepare a flexible budget performance report, assuming that the company worked 10,900 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
DepreciationDirect Labor HoursFixed CostsIndirect LaborIndirect MaterialsProperty TaxesSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUtilitiesVariable Costs
		$		$		$	FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
							FavorableUnfavorableNeither Favorable nor Unfavorable
		$		$		$	FavorableUnfavorableNeither Favorable nor Unfavorable

Answer 1

Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2020
	Budget	Actual Costs	Difference
Direct labor hours	10900	10900
Variable costs
Indirect labor	11990	11710	280	Favorable
Indirect materials	7630	7460	170	Favorable
Utilities	4360	3860	500	Favorable
Total variable cost	23980	23030	950	Favorable
Fixed costs
Supervision	4100	4100	0	Neither Favorable nor Unfavorable
Depreciation	2000	2000	0	Neither Favorable nor Unfavorable
Property taxes	500	500	0	Neither Favorable nor Unfavorable
Total fixed costs	6600	6600	0	Neither Favorable nor Unfavorable
Total costs	30580	29630	950	Favorable
Workings:
Variable costs
Indirect labor	11990	=10900*1.10
Indirect materials	7630	=10900*0.70
Utilities	4360	=10900*0.40