Asper Company has recently introduced budgeting as an integral part of its corporate planning process. An inexperienced member of the accounting staff was given the assignment of constructing a flexible budget for manufacturing overhead costs and prepared it in the format that follows Percentage of Capacity sex 100% Machine-hours 45,600 57, eee Utilities $ 32,360 $ 39,200 Supplies 13,680 17,100 Indirect labour 18,240 22,8ee Maintenance 48,360 55,200 Supervision 17,eee 17,000 Total manufacturing overhead cost $ 129,640 $ 151,300 The company assigns manufacturing overhead costs to production on the basis of standard machine-hours. The cost formulas used to prepare the budgeted figures above are relevant over a range of 80% to 100% of capacity in a month. The managers who will be working under these budgets have control over both fixed and variable manufacturing overhead costs Required: 1. Use the high-low method to separate fixed and variable costs. (Round variable cost answers to 2 decimal places.) Variable Component Fixed Component Overhead Item Utilities Supplies Indirect labour Maintenance Supervision Totals 0 $ 0.00 $ 2. Come up with a single cost formula for all overhead costs based on your analysis in requirement 1 above (Hint Your cost formula should be of the form y = a + bx) (Round variable cost answer to 2 decimal places.) 3. During May, the company operated at 85% of machine-hour capacity. Actual manufacturing overhead costs incurred during the month were as follows Utilities Supplies Indirect labour Maintenance Supervision Total actual manufacturing overhead cost $ 33,900 16,130 20,130 46,170 17,000 $133,330 Fixed costs had no budget variances. Prepare an overhead performance report for May, include both fixed and variable costs in your report in separate sections) Structure your report so that it shows only a spending variance for variable overhead. The company originally budgeted to work 45,600 machine-hours during the month standard hours allowed for the month's production totalled 46,600 machine-hours. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round "Cost Formula per MH* answers to 2 decimal places.) Cost Formula per MH Flexible Budget 48,450 MH Actual Cost 48,450 MH Overhead Costs Spending Variance Variable overhead costs 15 Fixed costs had no budget variances. Prepare an overhead performance report for May Include both fixed and variable costs in your report on separate sections) Structure your report so that it shows only a spending variance for variable overhead. The company originally budgeted to work 45,600 machine-hours during the month, standard hours allowed for the month's production totalled 46,600 machine-hours. (Indicate the effect of each variance by selecting "F" for favorable. "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round "Cost Formula per MH" answers to 2 decimal places.) od Cost Formula per MH Actual Cost 48,450 MH Overhead Costs Variable overhead couts Flexible Budget 48,450 MH Spending Variance anos 0.00 0 Total variable overhead cost $ Fixed overhead costs 0 Total fixed overhead cost Total overhead cost 0 Os $ 0
