Question
Johnson Company estimates that 378,500 direct labor hours will be worked during the coming year, 2020,...
Johnson Company estimates that 378,500 direct labor hours will be worked during the coming year, 2020, in the the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.
Fixed Overhead Costs
_______________________________
Supervision $87,840
Depreciation $68,760
Insurance $30,000
Rent $24,360
Property Taxes $18,480
Total: $229,440
Variable Overhead Costs
__________________________________
Indirect labor $166,540
Indirect materials $83,270
Repairs $37,850
Utilities $75,700
Lubricants $30,280
Total: $393,640
It is estimated that direct labor hours worked each month will range from 25,800 to 36,600 hours.
During October, 25,800 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: Supervision $7,320, Depreciation $5,730, Insurance $2,460, Rent $2,030, and Property Taxes $1,540.
Variable overhead costs: Indirect labor $12,352, Indirect materials, $5,336, Repairs $2,510, Utilities $5,460, and Lubricants $2,304
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,600 direct labor hours over the relevant range for the year ending December 31,2020.
(b) Prepare a flexible budget report for October.
Answers
Calculation:
Planning Budget:
Direct labor hours = 378,500
Indirect labor = $166,540
Indirect labor per direct labor hour = $166,540 / 378,500
Indirect labor per direct labor hour = $0.44Indirect materials = $83,270
Indirect materials per direct labor hour = $83,270 / 378,500
Indirect materials per direct labor hour = $0.22Repairs = $37,850
Repairs per direct labor hour = $37,850 / 378,500
Repairs per direct labor hour = $0.10Utilities = $75,700
Utilities per direct labor hour = $75,700 / 378,500
Utilities per direct labor hour = $0.20Lubricants = $30,280
Lubricants per direct labor hour = $30,280 / 378,500
Lubricants per direct labor hour = $0.0833,000 36,600 Answer to Requirement 1. JOHNSON COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2020 Activity Level Direct labor hours 25,800 29,400 Variable Costs: Indirect labor @ $0.44 per DLH 11,352 12,936 Indirect materials @0.22 per DLH 5,676 6,468 Repairs @ $0.10 per DLH 2,580 2,940 Utilities @ $0.20 per DLH 5,160 5,880 Lubricants @ $0.08 per DLH 2,064 2,352 Total Variable Costs 26,832 30,576 Fixed Costs: Supervision 7,320 7,320 Depreciation 5,730 5,730 Insurance 2,500 Rent 2,030 Property Taxes 1,540 1,540 Total Fixed Costs 19,120 19,120 Total Costs 45,952 49,696 14,520 7,260 3,300 6,600 2,640 34,320 16,104 8,052 3,660 7,320 2,928 38,064 7,320 5,730 2,500 2,030 2,500 2,030 1,540 19,120 53,440 7,320 5,730 2,500 2,030 1,540 19,120 57,184Answer to requirement 2. JOHNSON COMPANY Packaging Department Monthly Manufacturing Overhead Flexible Budget For the Year 2020 Budget Actual 25,800 25,800 Difference 11,352 5,676 2,580 5,160 2,064 26,832 12,352 5,336 2,510 5,460 2,304 27,962 1,000 340 70 300 240 1,130 Unfavorable Favorable Favorable Unfavorable Unfavorable Unfavorable Direct labor hours Variable Costs Indirect labor Indirect materials Repairs Utilities Lubricants Total Variable Costs Fixed Costs Supervision Depreciation Insurance Rent Property Taxes Total Fixed Costs Total Costs 7,320 7,320 5,730 2,500 2,030 1,540 19,120 45,952 5,730 2,460 2,030 1,540 19,080 47,042 Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Favorable Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Favorable Unfavorable 40 1,090
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