E24-3 Prepare flexible manufacturing overhead budget
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.
$1.00
0.70
0.40
Fixed overhead costs per month are supervision $4,000, depreciation, $1,200, and property taxes $800.
The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.
Instructions
Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity,
using increments of 1,000 direct labor hours.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Indirect labor ($1.00) ? ? ? ?
Indirect materials ($0.70) ? ? ? ?
Utilities ($0.40) ? ? ? ?
Total variable cost ($2.10) ? ? ? ?
Fixed costs
Supervision Value Value Value Value
Depreciation Value Value Value Value
Property taxes Value Value Value Value
Total fixed costs ? ? ? ?
Total costs ? ? ? ?
After you have completed E24-3 consider the following additional question.
1. Assume that the variable manufacturing overhead costs for indirect labor and indirect materials
changed to $1.25 and $0.80 respectively. Revise the monthly manufacturing overhead flexible budget,
using increments of 1,000 direct labor hours.
For the Year 2017
Indirect labor
Indirect materials
Utilities
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
E24-3 Solution
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Indirect labor ($1.00) $7,000 $8,000 $9,000 $10,000
Indirect materials ($0.70) 4,900 5,600 6,300 7,000
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
For the Year 2017
E24-3 Solution to additional question
1. Assume that the variable manufacturing overhead costs for indirect labor and indirect materials
changed to $1.25 and $0.80 respectively. Revise the monthly manufacturing overhead flexible budget,
using increments of 1,000 direct labor hours.
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Indirect labor ($1.25) 8,750$ 10,000$ 11,250$ 12,500$
E24-4 Prepare flexible manufacturing overhead budget
Meyers 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 0.70
Utilities 0.40
Fixed overhead costs per month are supervision $4,000, depreciation, $1,200, and property taxes $800.
The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.
Using the information above, assume that in July 2017, Meyers Company incurs the following manufacturing
overhead costs.
Indirect labor 8,800$ Supervision 4,000$
Indirect materials 5,800 Depreciation 1,200
Utilities 3,200 Property taxes 800
Instructions
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
(c ) Comment on your findings.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
Direct labor hours (DLH) 9,000 DLH 9,000 DLH Unfavorable U
Variable costs
Indirect labor ($1.00) ? Value ?
Indirect materials ($0.70) ? Value ?
Utilities ($0.40) ? Value ?
Total variable costs ($2.10) ? ? ?
Fixed costs
Supervision Value Value Value
Depreciation Value Value Value
Property taxes Value Value Value
Total fixed costs ? ? ?
Total costs ? ? ?
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
Direct labor hours (DLH) 8,500 DLH 8,500 DLH Unfavorable U
Variable costs
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Variable Costs
Fixed Costs
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Indirect labor ($1.00) ? ? ?
Indirect materials ($0.70) ? ? ?
Utilities ($0.40) ? ? ?
Total variable costs ($2.10) ? ? ?
Supervision Value Value Value
Depreciation Value Value Value
Property taxes Value Value Value
Total fixed costs ? ? ?
Total costs ? ? ?
(c ) Comment on your findings.
After you have completed E24-4 consider the following additional question.
1. Assume that actual direct labor hours was 8,750 for the month of July 31, 2017. Actual costs
incurred for Indirect labor and indirect materials were $8,500 and $5,500. Revise the manufacturing
overhead flexible budget report for July.
Response:
E24-4 Solution
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
9,000 DLH 9,000 DLH Unfavorable U
Direct labor hours (DLH)
Variable costs
Indirect labor ($1.00) 9,000$ 8,800$ $200 F
Indirect materials ($0.70) 6,300 5,800 500 F
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
8,500 DLH 8,500 DLH Unfavorable U
Direct labor hours (DLH)
Variable costs
Indirect labor ($1.00) 8,500$ 8,800$ (300)$ U
Indirect materials ($0.70) 5,950 5,800 150 F
Utilities ($0.40) 3,400 3,200 200 F
For the Month Ended July 31, 2017
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
E24-4 Solution to additional question
1. Assume that actual direct labor hours was 8,750 for the month of July 31, 2017. Actual costs
incurred for Indirect labor and indirect materials were $8,500 and $5,500. Revise the manufacturing
overhead flexible budget report for July.
(a) Prepare a flexible budget performance report, assuming that the company worked 8,750 direct labor
hours during the month.
Difference
Budget at Actual Costs Favorable F
Variable costs
Indirect labor ($1.00) 8,750$ 8,500$ $250 F
Indirect materials ($0.70) 6,125 5,500 625 F
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
E24-5 Prepare flexible manufacturing overhead budget
Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from
$170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising
4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery
equipment $7,000, and insurance on delivery equipment $1,000.
Instructions
Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for
the year ending December 31, 2017.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Sales commissions (6%) ? ? ? ?
Advertising (4%) ? ? ? ?
Traveling (3%) ? ? ? ?
Delivery (2%) ? ? ? ?
Total variable expenses (15%
? ? ? ?
Fixed expenses
Sales salaries Value Value Value Value
Depreciation Value Value Value Value
Insurance Value Value Value Value
Total fixed expenses ? ? ? ?
Total expenses Value Value Value Value
After you have completed E24-5 consider the following additional question.
1. Assume that variable costs and their percentage relationship to sales are sales commissions 7%,
advertising 3.5%, traveling 4%, and delivery 1%. Revise the monthly flexible budget for each $10,000
increment of sales for the year ending December 31, 2017.
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
E24-5 Solution
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Sales commissions (6%) $10,200 $10,800 $11,400 $12,000
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
E24-5 Solution to additional question
1. Assume that variable costs and their percentage relationship to sales are sales commissions 7%,
advertising 3.5%, traveling 4%, and delivery 1%. Revise the monthly flexible budget for each $10,000
increment of sales for the year ending December 31, 2017.
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Sales commissions (7%) $11,900 $12,600 $13,300 $14,000
Advertising (3.5%) 5,950 6,300 6,650 7,000
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
P24-1A Prepare flexible manufacturing overhead budget
Bumblebee Company estimates that 300,000 direct labor hours will be worked during the coming year, 2017,
in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data
are computed for the year.
Supervision $96,000 Indirect labor $126,000
Depreciation 72,000 Indirect materials 90,000
Insurance 30,000 Repairs 69,000
Rent 24,000 Utilities 72,000
Property taxes 18,000 Lubricants 18,000
$240,000 $375,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.
During October, 27,000 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: supervision $8,000, depreciation $6,000, insurance $2,460, rent $2,000,
and property taxes $1,500.
Variable overhead costs: indirect labor $12,432, indirect materials $7,680, repairs $6,100,
utilities $6,840, and lubricants $1,920.
Instructions
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
(b) Prepare a flexible budget report for October.
(c ) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
Activity level
Direct labor hours 27,000 30,000 33,000 36,000
Variable costs
Indirect labor ($0.42) ? ? ? ?
Indirect materials ($0.30) ? ? ? ?
Repairs ($0.23) ? ? ? ?
Utilities ($0.24) ? ? ? ?
Lubricants ($0.06) ? ? ? ?
Total variable costs ($1.25) ? ? ? ?
Fixed costs
Supervision ? ? ? ?
Depreciation ? ? ? ?
Insurance ? ? ? ?
Rent ? ? ? ?
Property taxes ? ? ? ?
Total fixed costs ? ? ? ?
Total costs ? ? ? ?
Fixed Overhead Costs
BUMBLEBEE COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
Variable Overhead Costs
For the Year 2017
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Direct labor hours 27,000 DLH 27,000 DLH
Unfavorable U
Variable costs
Indirect labor ($0.42) ? Value ?
Indirect materials ($0.30) ? Value ?
Repairs ($0.23) ? Value ?
Utilities ($0.24) ? Value ?
Lubricants ($0.06) ? Value ?
Total variable costs ($1.25) ? ? ?
Fixed costs
Supervision Value Value ?
Depreciation Value Value ?
Insurance Value Value ?
Rent Value Value ?
Property taxes Value Value ?
Total fixed costs ? ? ?
Total costs ? ? ?
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
After you have completed P24-1A consider the following additional question.
1. Assume that during October, the actual direct labor hours worked changed to 27,500 hours.
In addition, actual variable overhead costs incurred for indirect labor and indirect materials
also changed to $13,500 and $8,200 respectively. Revise the flexible budget report for
October.
BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
Response:
P24-1A Solution
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
Activity level
Direct labor hours 27,000 30,000 33,000 36,000
Variable costs
Indirect labor ($0.42)* 11,340$ 12,600$ 13,860$ 15,120$
Indirect materials ($0.30) 8,100 9,000 9,900 10,800
Fixed costs
Supervision** 8,000 8,000 8,000 8,000
Depreciation 6,000 6,000 6,000 6,000
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Direct labor hours 27,000 DLH 27,000 DLH Unfavorable U
Variable costs
Indirect labor ($0.42) $11,340 12,432$ ($1,092) U
Indirect materials ($0.30) 8,100 7,680 420 F
BUMBLEBEE COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
For the Year 2017
Monthly Manufacturing Overhead Flexible Budget
Packaging Department
BUMBLEBEE COMPANY
Packaging Department
Depreciation 6,000 6,000 0
Insurance 2,500 2,460 40 F
P24-1A Solution to additional question
1. Assume that during October, the actual direct labor hours worked changed to 27,500 hours.
In addition, actual variable overhead costs incurred for indirect labor and indirect materials
also changed to $13,500 and $8,200 respectively. Revise the flexible budget report for
October.
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Direct labor hours 27,500 DLH 27,500 DLH Unfavorable U
Variable costs
Indirect labor ($0.42) $11,550 13,500$ ($1,950) U
Indirect materials ($0.30) 8,250 8,200 50 F
Repairs ($0.23) 6,325 6,100 225 F
BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017