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		$1.30
Indirect materials		0.90
Utilities		0.40

Fixed overhead costs per month are Supervision $4,300, Depreciation $1,900, and Property Taxes $500. The company believes it will normally operate in a range of 6,4009,400 direct labor hours per month. Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs				Fixed Costs
Indirect labor		$10,670		Supervision		$4,300
Indirect materials		7,450		Depreciation		1,900
Utilities		2,950		Property taxes		500

(a) Prepare a flexible budget performance report, assuming that the company worked 8,400 direct labor hours during the month. (List variable costs before fixed costs.)

(b) Prepare a flexible budget performance report, assuming that the company worked 7,800 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 nor Unfavorable Budget Actual Costs