Question
Alcore Company estimates that 240,000 direct labour hours will be worked in the assembly department during 2020. Based on that, the following budgeted manufacturing overhead
Alcore Company estimates that 240,000 direct labour hours will be worked in the assembly department during 2020. Based on that, the following budgeted manufacturing overhead data are calculated:
Fixed Overhead Costs
Supervision $72,000
Depreciation 30,000
Insurance 12,000
Rent 8,000
Property taxes 6,000
Total $128,000
Variable Overhead Costs
Indirect labour $75,000
Indirect materials 48,000
Repairs 36,000
Utilities 26,400
Lubricants 9,600
Total $195,000
It is estimated that the direct labor hours worked each month will range from 18,000 to 24,000 hours. During January, 20,000 direct labor hours were worked and the following overhead costs were incurred.
Fixed Overhead Costs
Supervision $6,000
Depreciation 2,500
Insurance 1,000
Rent 850
Property taxes 500
Total $10,850
Variable Overhead Costs
Indirect labour $6,300
Indirect materials 3,700
Repairs 2,700
Utilities 1,900
Lubricants 830
Total $15,430
(a) Prepare monthly flexible manufacturing overhead budget for each increment of 2,000 direct labor hours over the relevant range for the year ending December 31, 2020.
(b) Prepare manufacturing overhead budget report for January.
(c) Comment on management's efficiency in controlling manufacturing overhead costs in January.
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