Exercise 22-4

Myers Company 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 $4,200, Depreciation $1,800, and Property Taxes $600. The company believes it will normally operate in a range of 7,00013,000 direct labor hours per month. Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$10,760		Supervision		$4,200
Indirect materials		7,520		Depreciation		1,800
Utilities		3,950		Property taxes		600

(a) Prepare a flexible budget performance report, assuming that the company worked 11,000 direct labor hours during the month. (List variable costs before fixed costs.) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017 Difference Favorable Unfavorable Neither Favorable Budget Actual Costs nor Unfavorable (b) Prepare a flexible budget performance report, assuming that the company worked 10,300 direct labor hours during the month. (List variable costs before fixed costs.) MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017 Difference Favorable Unfavorable Neither Favorable Budget Actual Costs nor Unfavorable