Thome 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 7,000-10,000 direct labor hours per month.
Assume that in July 2014, Thome 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 |
Comment on the findings of manufacturing overhead flexible budget report using the two different direct labor hours presented in Exercise 10-4.