Question

Flexible Budget Application The polishing department of Taylor Manufacturing Company oper-

ated during April 2019 with the following manufacturing overhead cost budget based on 4,000 hours

of monthly productive capacity:

TAYLOR MANUFACTURING COMPANY

Polishing Department

Overhead Budget (4,000 Hours)

for the Month of April 2019

Variable costs:

Factory supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000

Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000

Utilities (usage charge) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,000

Patent royalties on secret process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296,000

Total variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 616,000

Fixed costs:

Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000

Depreciation on factory equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,000

Factory taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000

Factory insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000

Utilities (base charge) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000

Total fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 464,000

Total manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,080,000

The polishing department was operated for 4,600 hours during April and incurred the following

manufacturing overhead costs:

Factory supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,520

Indirect labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,160

Utilities (usage factor). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,800

Utilities (base factor). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,000

Patent royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,416

Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,000

Depreciation on factory equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,000

Factory taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,000

Factory insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000

Total manufacturing overhead incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,092,896

Required

Using a flexible budgeting approach, prepare a performance report for the polishing department for

April 2019, comparing actual overhead costs with budgeted overhead costs for 4,600 hours. Separate

overhead costs into variable and fixed components and show the amounts of any variances between

actual and budgeted amounts

Answer 1

Performance report for the polishing department for April 2019