Using the information in E25.3, assume that in July 2020, Shillong Lighting incurs the following manufacturing overhead costs.

Instructions

a. Prepare a fl exible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.

b. Prepare a fl exible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.

c. Comment on your fi ndings.

Data from E25.3:

Shillong Lighting 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.

Transcribed Image Text:

Variable Costs Fixed Costs £4,000 1,200 Supervision Depreciation Property taxes Indirect labor £8,800 Indirect materials Utilities 5,800 3,200 800