Myers 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 $1.00
Indirect materials 0.70
Utilities 0.20

Fixed overhead costs per month are Supervision $4,000, Depreciation $1,000, and Property Taxes $500. The company believes it will normally operate in a range of 7,000–10,600 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity, using increments of 1,200 direct labor hours.

Myers Company

A Monthly Manufacturing Overhead Flexible Budget for 2017:

Operating Ranges           Per Hour    7,000      8,200     9,400     10,600

Variable costs:

Indirect labor                   $1.00        $7,000    $8,200   $9,400   $10,600

Indirect materials              0.70          4,900      5,740      6,580       7,420

Utilities                              0.20           1,400       1,640       1,880       2,120

Total variable costs                        $13,300  $15,580   $17,860   $20,140

Fixed overhead costs per month:

Supervision    $4,000                       4,000      4,000      4,000       4,000

Depreciation   $1,000                       1,000       1,000       1,000        1,000

Property Taxes $500                         500         500         500           500

Total fixed costs                            $5,500   $5,500    $5,500     $5,500

Total costs                                    $18,800  $21,080  $23.360   $25,640

Explanation:

a) Data and Calculations:

Variable manufacturing overhead costs per direct labor hour:

Indirect labor                   $1.00

Indirect materials              0.70

Utilities                              0.20

Total variable per unit = $1.90

Fixed overhead costs per month:

Supervision    $4,000

Depreciation   $1,000

Property Taxes $500

Operation range of direct labor hours = 7,000 - 10,600

Increments of direct labor hours = 1,200

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