Question

Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2020 contained the following data.

Variable Costs				Fixed Costs
Indirect materials		$11,100		Supervisory salaries		$36,700
Indirect labor		11,000		Depreciation		6,100
Utilities		7,700		Property taxes and insurance		7,400
Maintenance		5,500		Maintenance		4,900

Actual variable costs were indirect materials $14,800, indirect labor $9,200, utilities $9,300, and maintenance $5,200. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,400. 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.)

(b) Prepare a responsibility report for the first quarter.

Answer 1

As the Actual activity is same as budgeted

Master budget= flexible budget

a)Manufacturing Overhead Flexible Budget for the first quarter

Particulars	Flexible Budget	Actual	Variance
Variable Cost
Indirect Materials	$11,100	$14,800	$3,700 U [$14,800-$11,100]
Indirect Labor	$11,000	$9,200	$1,800 F [$11,000-9,200]
Utilities	$7,700	$9,300	$1,600 U [$7,700-$9,300]
Maintenance	$5,500	$5,200	$300 F [$5,500-5,200]
Total Variable Cost	$35,300 [$11,100+11,000+7,700+5,500]	$38,500	3,200 U [$35,300-38,500]
Fixed Cost
Supervisory Salaries	$36,700	$36,700	''N''
Depreciation	$6,100	$6,100	''N''
Property taxes and insurance	$7,400	$8,400	$300 U
Maintenance	$4,900	$4,900	''N''
Total Fixed Cost	$55,100 [$36,700+$6,100+$7,400+$4,900]	$56,100	1,000 U[$55,100-$56,100]
Total Cost	$90,400 [$55,100+$35,300]	$94,600	$4,200 U [$90,400-94,600]

b) Manufacturing Overhead Responsibility Report

Particulars	Flexi Budget	Actual	Variance
Controllable Cost
Indirect Materials	$11,100	$14,800	$3,700 U
Indirect Labor	$11,000	$9,200	$1,800 F
Utilities	$7,700	$9,300	$1,600 U
Maintenance	$10,400[$5,500+$4,900]	$10,100[$5,200+$4,900]	$300 F
Supervisory Salaries	$36,700	$36,700	N
Total Cost	$76,900	$80,100	$3,200 U [3,700+1,600-1,800-300]