Problem 22-1A
Cook Company estimates that 353,100 direct labor hours will be worked during the coming year, 2014, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data, are computed for the year.
| Fixed Overhead Costs | Variable Overhead Costs | |||||
| Supervision | $86,040 | Indirect labor | $148,302 | |||
| Depreciation | 76,080 | Indirect materials | 95,337 | |||
| Insurance | 29,880 | Repairs | 45,903 | |||
| Rent | 28,800 | Utilities | 84,744 | |||
| Property taxes | 19,920 | Lubricants | 31,779 | |||
| $240,720 | $406,065 | |||||
It is estimated that direct labor hours worked each month will range from 21,500 to 31,100 hours.
During October, 21,500 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: supervision $7,170, depreciation $6,340, insurance $2,464, rent $2,400, and property taxes $1,660.
Variable overhead costs: indirect labor $10,032, indirect materials, $5,378, repairs $2,753, utilities $5,478, and lubricants $2,183.
Prepare a monthly manufacturing overhead flexible budget for each increment of 3,200 direct labor hours over the relevant range for the year ending December 31, 2014.(List variable costs before fixed costs.)
| COOK COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2014 |
COOK COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
For the Year 2014
| Particiular | Activity level | |||
| Direct labor hours | 21500 | 24700 | 27900 | 31100 |
| Variable costs | ||||
| direct labor ($.42)* | 9030 | 10374 | 11718 | 13062 |
| Indirect materials ($.27) | 5805 | 6669 | 7533 | 8397 |
| Repairs ($0.13) | 2795 | 3211 | 3627 | 4043 |
| Utilities ($0.24) | 5160 | 5928 | 6696 | 7464 |
| Lubricants ($0.09) | 1935 | 2223 | 2511 | 2799 |
| Total variable costs ($1.15) | 24725 | 28405 | 32085 | 35765 |
| Fixed costs | ||||
| Supervision | 7170 | 7170 | 7170 | 7170 |
| Depreciation | 6340 | 6340 | 6340 | 6340 |
| Insurance | 2464 | 2464 | 2464 | 2464 |
| Rent | 2400 | 2400 | 2400 | 2400 |
| Property taxes | 1660 | 1660 | 1660 | 1660 |
| Total fixed costs | 20034 | 20034 | 20034 | 20034 |
| Total costs | 44759 | 48439 | 52119 | 55799 |
Working Notes for the above answer
1
| Direct Labour Hour | |
| Starding | 21500 |
| Increase by | 3200 |
| Level | 24700 |
| Increase by | 3200 |
| Level | 27900 |
| Increase by | 3200 |
| Level | 31100 |
2
| * | |||
| A | B | A/B | |
| direct labor ($.42)* | 148302 | 353100 | 0.42 |
| Indirect materials ($.27) | 95337 | 353100 | 0.27 |
| Repairs ($0.13) | 45903 | 353100 | 0.13 |
| Utilities ($0.24) | 84744 | 353100 | 0.24 |
| Lubricants ($0.09) | 31779 | 353100 | 0.09 |
| Total variable costs ($1.15) | 1.15 | ||
2
| COOK COMPANY Packaging Department Manufacturing Overhead Flexible Budget Report For the Month Ended October 31, 2014 |
||||
| Particiular | Activity level | |||
| Budgeted | Actual | Diffrance | F/U | |
| Direct labor hours | 21500 | 21500 | ||
| Variable costs | ||||
| direct labor ($.42)* | 9030 | 10032 | -1002 | U |
| Indirect materials ($.27) | 5805 | 5378 | 427 | F |
| Repairs ($0.13) | 2795 | 2753 | 42 | F |
| Utilities ($0.24) | 5160 | 5478 | -318 | U |
| Lubricants ($0.09) | 1935 | 2183 | -248 | U |
| Total variable costs ($1.15) | 24725 | 25824 | -1099 | U |
| Fixed costs | ||||
| Supervision | 7170 | 7170 | 0 | – |
| Depreciation | 6340 | 6340 | 0 | – |
| Insurance | 2464 | 2464 | 0 | – |
| Rent | 2400 | 2400 | 0 | – |
| Property taxes | 1660 | 1660 | 0 | – |
| Total fixed costs | 20034 | 20034 | 0 | – |
| Total costs | 44759 | 45858 | -1099 | U |
