Question
Rose Company uses a flexible budget for manufacturing overhead based on direct labor hours. The following information are from the yearly static overhead budget for
- Rose Company uses a flexible budget for manufacturing overhead based on direct labor hours. The following information are from the yearly static overhead budget for the Production Department for 2023. It is based on 300,000 direct labor hours.
Variable Costs Fixed Costs
Indirect labor ($1.2 per DL hour) $30,000 Supervision $ 5,000
Supplies and lubricants ($0.5 per DL hour) 12,500 Depreciation 2,000
Maintenance ($0,7 per DL hour) 17,500 Property taxes 1,500
Utilities ($0,4 per DL hour) 10,000 Insurance 1,000
During July, 24,500 direct labor hours were worked. The company incurred the following variable costs in July: indirect labor $30,200, supplies and lubricants $11,600, maintenance $17,500, and utilities $9,200. Actual fixed overhead costs were the same as monthly budgeted fixed costs.
a.) Prepare a flexible monthly budget for the Production Department for the relevant range between 24,000 and 26,000 DL hours with increments of 1000 DL hours. (17 points)
b.) Prepare a flexible budget report for the Production Department for July. (17 points)
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