Malone Company estimates that 360,000 direct labor hours will be worked during the coming year, 2008, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.
for the year.
Fixed Overhead Costs
Variable Overhead Costs
Supervision $ 90,000
Indirect labor $126,000
Depreciation 60,000
Indirect materials 90,000
Insurance 30,000
Repairs 54,000
Rent 24,000
Utilities 72,000
Property taxes 18,000
Lubricants 18,000 $222,000 $360,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours. During October, 27,000 direct labor hours were worked and the following overhead costs were incurred. Fixed overhead costs: Supervision $7,500, Depreciation $5,000, Insurance $2,470, Rent $2,000, and Property taxes $1,500.
Variable overhead costs: Indirect labor $10,360, Indirect materials, $6,400, Repairs $4,000, Utilities $5,700, and Lubricants $1,640.
(a)Total costs: DLH 27,000, $45,500; DLH 36,000, $54,500
Instructions
(a)Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor hours over the relevant range for the year ending December 31, 2008.
(b)Prepare a flexible budget report for October.
(c) Comment on management's efficiency in controlling manufacturing overhead costs in October.