Exercise 24-4 (Essay)

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	0.60
Utilities	0.40

Fixed overhead costs per month are Supervision $4,000, Depreciation $1,200, and Property Taxes $800. The company believes it will normally operate in a range of 7,00010,000 direct labor hours per month.

Assume that in July 2017, Myers Company incurs the following manufacturing overhead costs.

Variable Costs	Fixed Costs
Indirect labor	$8,800	Supervision	$4,000
Indirect materials	5,300	Depreciation	1,200
Utilities	3,200	Property taxes	800

MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017
Difference
Budget	Actual Costs	Favorable F Unfavorable U
Direct labor hours (DLH)	9,000 DLH	9,000 DLH
Variable costs
Indirect labor	$9,000	$8,800	$200	F
Indirect materials	6,300	5,800	500	F
Utilities	3,600	3,200	400	F
Total variable costs	18,900	17,800	1,100	F
Fixed costs
Supervision	4,000	4,000
Depreciation	1,200	1,200
Property taxes	800	800
Total fixed costs	6,000	6,000
Total costs	$24,900	$23,800	$1,100	F

MYERS COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2017
Difference
Budget	Actual Costs	Favorable F Unfavorable U
Direct labor hours (DLH)	8,500 DLH	8,500 DLH
Variable costs
Indirect labor ($1.00)	$8,500	$8,800	$300	U
Indirect materials ($0.70)	5,950	5,800	150	F
Utilities ($0.40)	3,400	3,200	200	F
Total variable costs ($2.10)	17,850	17,800	50	F
Fixed costs
Supervision	4,000	4,000
Depreciation	1,200	1,200
Property taxes	800	800
Total fixed costs	6,000	6,000
Total costs	$23,850	$23,800	$50	F

Comment on the findings of manufacturing overhead flexible budget report using the two different direct labor hours9,000 and 8,500.