Question

Johnson Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct hour are as follows.

Indirect labor: $1.30

Indirect materials: $0.80

Utilities: $0.30

Fixed overhead costs per month are Supervision $4,300, Depreciation $2,000, and Property Taxes $600. The company believes it will normally operate in a range of 6,100-10,000 direct labor hours per month.

Assume that in July 2020, Johnson Company incurs the following manufacturing overhead costs.

Variable Costs Fixed Costs

________________________________________________________________________________________

Indirect labor $11,050 Supervision $4,300

Indirect materials $6,790 Depreciation $2,000

Utilities $2,180 Property Taxes $600

(a) Prepare a flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month.

(b) Prepare a flexible budget performance report, assuming that the company worked 8,100 direct labor hours during the month.

  

Answer 1

Answer-a)-

JOHNSON COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended July 31,2020
Particulars	Flexible Budget	Actual Costs	Variances	Remark
8700 Direct Labor Hours	$	$	$
Variable costs:-
Indirect labor	8700 hours*$1.30 per hour=11310	11050	260	Favorable
Indirect materials	8700 hours*$0.80 per hour=6960	6790	170	Favorable
Utilities	8700 hours*$0.30 per hour=2610	2180	430	Favorable
Total variable costs (a)	20880	20020	860	Favorable
Fixed costs:-
Supervision	4300	4300	0	None
Depreciation	2000	2000	0	None
Property Tax	600	600	0	None
Total fixed costs (b)	6900	6900	0	None
Total costs (c=a+b)	27780	26920	860	Favorable

b)-

JOHNSON COMPANY
Manufacturing Overhead Flexible Budget Report
For the month ended July 31,2020
Particulars	Flexible Budget	Actual Costs	Variances	Remark
8100 Direct Labor Hours	$	$	$
Variable costs:-
Indirect labor	8100 hours*$1.30 per hour=10530	11050	-520	Unfavorable
Indirect materials	8100 hours*$0.80 per hour=6480	6790	-310	Unfavorable
Utilities	8100 hours*$0.30 per hour=2430	2180	250	Unfavorable
Total variable costs (a)	19440	20020	-580	Unfavorable
Fixed costs:-
Supervision	4300	4300	0	None
Depreciation	2000	2000	0	None
Property Tax	600	600	0	None
Total fixed costs (b)	6900	6900	0	None
Total costs (c=a+b)	26340	26920	-580	Unfavorable