Question

Exercise 22-3

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		$1.30
Indirect materials		0.80
Utilities		0.20

Fixed overhead costs per month are Supervision $3,900, Depreciation $2,000, and Property Taxes $800. The company believes it will normally operate in a range of 8,000–11,600 direct labor hours per month.

Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,200 direct labor hours. (List variable costs before fixed costs.)

Answer 1

Answer

Flexible Manufacturing overhead budget(Monthly) for 2017
		Activity Level(Labor Hours)
	Rate Per Hour	8000	9200	10400	11600
Variable overhead
Indirect Material	$                1.30	$        10,400	$        11,960	$        13,520	$        15,080
Indirect Labor	$                0.80	$          6,400	$          7,360	$          8,320	$          9,280
Utilities	$                0.20	$          1,600	$          1,840	$          2,080	$          2,320
Fixed Overhead
Supervision	Fixed Monthly	$          3,900	$          3,900	$          3,900	$          3,900
Depreciation	Fixed Monthly	$          2,000	$          2,000	$          2,000	$          2,000
Property Taxes	Fixed Monthly	$              800	$              800	$              800	$              800
Total Manufacturing Overhead		$        25,100	$        27,860	$        30,620	$        33,380

Workings

Calculation of Variable overhead
For 8000 Hours	Rate		Hours		Overhead
Indirect Material	$                1.30	x	8000	=	$        10,400
Indirect Labor	$                0.80	x	8000	=	$          6,400
Utilities	$                0.20	x	8000	=	$          1,600
For 9200 Hours	Rate		Hours		Overhead
Indirect Material	$                1.30	x	9200	=	$        11,960
Indirect Labor	$                0.80	x	9200	=	$          7,360
Utilities	$                0.20	x	9200	=	$          1,840
For 10400 Hours	Rate		Hours		Overhead
Indirect Material	$                1.30	x	10400	=	$        13,520
Indirect Labor	$                0.80	x	10400	=	$          8,320
Utilities	$                0.20	x	10400	=	$          2,080
For 11600 Hours	Rate		Hours		Overhead
Indirect Material	$                1.30	x	11600	=	$        15,080
Indirect Labor	$                0.80	x	11600	=	$          9,280
Utilities	$                0.20	x	11600	=	$          2,320

Hit Thumbs up if satisfied

Have any query mention in comment section please

Thank you