Cook Company estimates that 393,700 direct labor hours will be worked during the

Question

Cook Company estimates that 393,700 direct labor hours will be worked during the coming year, 2014, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year Fixed Overhead Costs Variable Overhead Costs Supervision Depreciation Insurance Rent Property taxes $90,720 Indirect labor 63,120 Indirect materials 31,200 Repairs 21,360 Utilities 21,240 Lubricants $141,732 102,362 70,866 59,055 19,685 $393.700 $227,640 It is estimated that direct labor hours worked each month will range from 29,100 to 39,600 hours During October, 29,100 direct labor hours were worked and the following overhead costs were incurred Fixed overhead costs: supervision $7,560, depreciation $5,260, insurance $2,552, rent $1,780, and property taxes $1,770 Variable overhead costs: indirect labor $11,374, indirect materials, $7,169, repairs $5,182, utilities $4,753, and lubricants $1,742

Explanation / Answer

The overall performance of management was UNSATISFACTORY

Reason: Variable costs which are controllable have increased.

COOK COMPANY PACKAGING DEPARTMENT MONTHLY MANUFACTURING OVERHEAD FLEXIBLE BUDGET for the year 2014 Activity level Direct labor hours 29100 32600 36100 39600 Variable costs: indirect labor 10476 11736 12996 14256 indirect materials 7566 8476 9386 10296 repairs 5238 5868 6498 7128 utilities 4365 4890 5415 5940 lubricants 1455 1630 1805 1980 Total variable costs 29100 32600 36100 39600 Fixed Costs: supervision 7560 7560 7560 7560 depreciation 5260 5260 5260 5260 insurance 2600 2600 2600 2600 rent 1780 1780 1780 1780 property taxes 1770 1770 1770 1770 Total fixed costs 18970 18970 18970 18970 TOTAL MFG OVERHEAD COSTS 48070 51570 55070 58570 COOK COMPANY PACKAGING DEPARTMENT MONTHLY MANUFACTURING OVERHEAD FLEXIBLE BUDGET REPORT for the month of October 2014 Budget Actuals Difference Activity level - Direct labor hours 29100 29100 Variable Costs: indirect labor 10476 11374 898 U indirect materials 7566 7169 397 F repairs 5238 5182 56 F utilities 4365 4753 388 U lubricants 1455 1742 287 U Total variable costs 29100 30220 1120 U Fixed Costs: supervision 7560 7560 0 N depreciation 5260 5260 0 N insurance 2600 2552 48 F rent 1780 1780 0 N property taxes 1770 1770 0 N Total fixed costs 18970 18922 48 F TOTAL MFG OVERHEAD COSTS 48070 49142 1072 U

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