Speier Company estimates that 240,000 direct labor hours will be worked during 2017 in the Assembly Department. On this basis, the following budgeted manufacturing overhead data are computed. Variable Overhead Costs Fixed Overhead Costs Indirect labor $ 72,000 Supervision $ 75,600 Indirect materials 48,000 Depreciation 30,000 Repairs 36,000 Insurance 12,000 Utilities 24,000 Rent 9,600 Lubricants 12,000 Property taxes 6,000 $192,000 $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, 2017. (b) Prepare a manufacturing overhead budget report for January. (c) Comment on management’s efficiency in controlling manufacturing over- head costs in January.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Speier Company estimates that 240,000 direct labor hours will be worked during
2017 in the Assembly Department. On this basis, the following budgeted manufacturing
overhead data are computed.
Variable Overhead Costs Fixed Overhead Costs
Indirect labor $ 72,000 Supervision $ 75,600
Indirect materials 48,000
Repairs 36,000 Insurance 12,000
Utilities 24,000 Rent 9,600
Lubricants 12,000 Property taxes 6,000
$192,000 $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, 2017.
(b) Prepare a manufacturing overhead budget report for January.
(c) Comment on management’s efficiency in controlling manufacturing over-
head costs in January.
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