Question

Chapter 11 - Question 4

Flexible Budget Application
The polishing department of Taylor Manufacturing Company operated during April 2016 with the following manufacturing overhead cost budget based on 5,000 hours of monthly productive capacity:

Taylor Manufacturing Company Polishing Department Overhead Budget (5,000 Hours) For the Month of April 2016
Variable costs:
Factory supplies				$100,000
Indirect labor				152,000
Utilities				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

Using a flexible budgeting approach, prepare a performance report for the polishing department for April 2016, 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.

Do not use negative signs with your answers below.
Do not round until your final answer. Round answers to nearest whole number, if applicable.
Select either U for Unfavorable or F for Favorable using the drop down box next to each of your variance answers.

Answer 1

Solution:

Taylor Manufacturing Company
Polishing Department
Manufacturing overhead flexible budget report
For the month ended April 30, 2016
Particulars	Budget	Actual Cost	Variance
Variable Costs:
Factory Supplies	$92,000.00	$97,520.00	$5,520.00	U
Indirect labor	$139,840.00	$136,160.00	$3,680.00	F
Utilities	$62,560.00	$82,800.00	$20,240.00	U
Patent royalties on secret process	$272,320.00	$280,416.00	$8,096.00	U
Total variable Overhead	$566,720.00	$596,896.00	$30,176.00	U
Fixed Costs:
Supervisory salaries	$160,000.00	$168,000.00	$8,000.00	U
Depreciation on factory equipment	$144,000.00	$144,000.00	$0.00	None
Factory Taxes	$48,000.00	$56,000.00	$8,000.00	U
Factory Insurance	$32,000.00	$32,000.00	$0.00	None
Utilities (Base Charge)	$80,000.00	$96,000.00	$16,000.00	U
Total Fixed Overhead	$464,000.00	$496,000.00	$32,000.00	U
Total Overhead	$1,030,720.00	$1,092,896.00	$62,176.00	U