P10-1B Speier Company estimates that 240,000 direct labor hours will be worked during the coming year, 2014, in the Assembly Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.
|
Variable Overhead Costs |
Fixed Overhead Costs |
||||
|
Indirect labor |
$72,000 |
$0.30 |
Supervision |
$75,600 |
$6,300 |
|
Indirect materials |
48,000 |
$0.20 |
Depreciation |
30,000 |
$2,500 |
|
Repairs |
36,000 |
$0.15 |
Insurance |
12,000 |
$1,000 |
|
Utilities |
24,000 |
$0.10 |
Rent |
9,600 |
$800 |
|
Lubricants |
12,000 |
$0.05 |
Property taxes |
6,000 |
$500 |
|
$192,000 |
$0.80 |
$133,200 |
|||
It is estimated that direct labor hours worked each month will range from 18,000 to 24,000 hours.
During January, 20,000 direct labor hours were worked and the following overhead costs were incurred.
|
Variable Overhead Costs |
Fixed Overhead Costs |
|||
|
Indirect labor |
$6,200 |
Supervision |
$6,300 |
|
|
Indirect materials |
3,600 |
Depreciation |
2,500 |
|
|
Repairs |
2,300 |
Insurance |
1,000 |
|
|
Utilities |
1,700 |
Rent |
850 |
|
|
Lubricants |
1,050 |
Property taxes |
500 |
|
|
|
$14,850 |
|
$11,150 |
|
Instructions:
a. Prepare a monthly flexible manufacturing overhead budget for each increment of 2,000 direct labor hours over the relevant range for the year ending December 31, 2014.
b. Prepare a manufacturing overhead budget report for January.
c. Comment on management’s efficiency in controlling manufacturing overhead costs in January.
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