Myers Company uses a flexible budget for manufacturing overhead based on direct

Question

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.

Fixed overhead costs per month are Supervision $3,600, Depreciation $1,300, and Property Taxes $800. The company believes it will normally operate in a range of 7,100–11,000 direct labor hours per month.

Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,300 direct labor hours.

Indirect labor $1.20 Indirect materials 0.70 Utilities 0.20 Activity Level Direct Labor Hours Variable Costs Indirect Labor Indirect Materials Utilities Total Variable Costs Fixed Costs Supervision Depreciation Property Taxes Total Fixed Costs Total Costs

Explanation / Answer

Monthly Manufacturing Overhead Flexible Budget For the Year 2017 Activity level: Direct labor hours 7100 8400 9700 11000 Variable costs: Indirect labor 8520 10080 11640 13200 Indirect materials 4970 5880 6790 7700 Utilities 1420 1680 1940 2200 Total variable cost 14910 17640 20370 23100 Fixed costs: Supervision 3600 3600 3600 3600 Depreciation 1300 1300 1300 1300 Property taxes 800 800 800 800 Total fixed costs 5700 5700 5700 5700 Total costs 20610 23340 26070 28800

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