Bramble 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 0.70 Utilities 0.40 Fixed overhead costs per month are Supervision $4,200, Depreciation $1,500, and Property Taxes $800. The company believes it will normally operate in a range of 5,900–9,800 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2020 for the expected range of activity, using increments of 1,300 direct labor hours.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Bramble Company uses a flexible budget for manufacturing
| Indirect labor | $1.20 | |
| Indirect materials | 0.70 | |
| Utilities | 0.40 |
Fixed overhead costs per month are Supervision $4,200,
Prepare a monthly manufacturing overhead flexible budget for 2020 for the expected range of activity, using increments of 1,300 direct labor hours. (List variable costs before fixed costs.)
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