Exercise 25-04 a-b

Sheffield 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 0.80

Utilities 0.30

Fixed overhead costs per month are Supervision $4,300, Depreciation $2,000, and Property Taxes $600. The company believes it will normally operate in a range of 6,10010,000 direct labor hours per month.

Assume that in July 2020, Sheffield Company incurs the following manufacturing overhead costs.

Variable Costs Fixed Costs Indirect labor

Indirect labor		$11,050		Supervision		$4,300
Indirect materials		6,790		Depreciation		2,000
Utilities		2,180		Property taxes		600

(a) Prepare a flexible budget performance report, assuming that the company worked 8,700 direct labor hours during the month

SHEFFIELD COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020
						Difference
		Budget		Actual Costs		Favorable Unfavorable Neither Favorable nor Unfavorable

(b) Prepare a flexible budget performance report, assuming that the company worked 8,100 direct labor hours during the month

SHEFFIELD COMPANY Manufacturing Overhead Flexible Budget Report For the Month Ended July 31, 2020
						Difference
		Budget		Actual Costs		Favorable Unfavorable Neither Favorable nor Unfavorable