Problem
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 $ 1.00
Indirect materials 0.90
Utilities 0.40
Fixed overhead costs per month are Supervision $ 3,700 , Depreciation $ 1,700 , and Property Taxes $ 800 . The company believes it will normally operate in a range of 5,700 - 9,300 direct labor hours per month.
Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.
|
Variable Costs
|
Fixed Costs
|
|
Indirect labor
|
$ 7,870
|
Supervision
|
$ 3,700
|
|
Indirect materials
|
7,120
|
Depreciation
|
1,700
|
|
Utilities
|
2,780
|
Property taxes
|
800
|
(a) Prepare a flexible budget performance report, assuming that the company worked 8,100 direct labor hours during the month.
(b) Prepare a flexible budget performance report, assuming that the company worked 7,300 direct labor hours during the month.