Chapter 10, Problem 10.1AP

Bumblebee Company estimates that 300,000 direct labor hours will be worked during the coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data, shown on page 454, are computed for the year.

Fixed Overhead Costs
Supervision	$ 96,000
Depreciation	72,000
Insurance	30,000
Rent	24,000
Property taxes	18,000
	$240,000
Variable Overhead Costs
Indirect labor		$126,000
Indirect materials		90,000
Repairs		69,000
Utilities		72,000
Lubricants		18,000
		$375,000

It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.

During October, 27,000 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: supervision $8,000, depreciation $6,000, insurance $2,460, rent $2,000, and property taxes $1,500.

Variable overhead costs: indirect labor $12,432, indirect materials $7.680, repairs $6.100. utilities $6,840, and lubricants $1,920.

Instructions

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor hours over the relevant range for the year ending December 31, 2017.

(b) Prepare a flexible budget report for October.

(c) - Comment on management's efficiency in controlling manufacturing overhead costs in October.