Question

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 $1.20 Indirect materials 0.50 Utilities 0.20 Fixed overhead costs per month are Supervision $4,400, Depreciation $1,500, and Property Taxes $500. The company believes it will normally operate in a range of 7,700–10,700 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,000 direct labor hours.

Answer 1

Answer:

$\left[\begin{array}{cccccc}-&rate&7,700&8,700&9,700&10,700\\IL&1.2&9,240&10,440&11,640&12,840\\IM&0.5&4620&5,220&5,820&6,420&Utilities&0.2&924&10,44&1,164&1,284&Total  \: Variable&1.9&14,784&16,704&18,624&20,544&Fixed&6,100&6,100&6,100&6100&6,100&MO&-&20,884&22,804&24724&26,644&\end{array}\right]$

Explanation:

You have to apply the rate to each activity level.

for example

DL rate 1.20 x 7700 = 9240

The fixed cost remains constant.