Oakley Company estimates that 360,000 direct labour hours will be worked in the packaging department during 2022. Based on that, it has calculated the following budgeted manufacturing overhead cost data for the year. 

The company estimates that the direct labour hours worked each month will range from 27,000 to 36,000 hours. During October, 27,000 direct labour hours were worked and the following overhead costs were incurred: 

1. Fixed overhead costs—supervision $7,500; depreciation $5,000; insurance $2,470; rent $2,000; and property taxes $1,500. 

2. Variable overhead costs—indirect labour $10,360; indirect materials $6,400; repairs $4,000; utilities $5,700; and lubricants $1,640.

Instructions 

a. Prepare a monthly flexible manufacturing overhead budget for each increment of 3,000 direct labour hours over the relevant range for the year ended December 31, 2022. 

b. Prepare a flexible budget report for October. 

c. Comment on management’s efficiency in controlling manufacturing overhead costs in October.

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Fixed Overhead Costs Supervision Depreciation Insurance Rent Property taxes $ 90,000 60,000 30,000 24,000 18,000 $222,000 Variable Overhead Costs Indirect labour Indirect materials Repairs Utilities Lubricants $126,000 90,000 54,000 72,000 18,000 $360,000