Oakley Company estimates that 360,000 direct labour hours will be worked in the packaging department during 2012.
Question:
The company estimates that the direct labour hours worked each month will range from 27,000 to 36,000 hours. During October, 27,000 direct labour hours were worked and the following overhead costs were incurred:
1. Fixed overhead costs-supervision $7,500; depreciation $5,000; insurance $2,470; rent $2,000; and property taxes $1,500
2. Variable overhead costs-indirect labour $10,360; indirect materials $6,400; repairs $4,000; utilities $5,700; and lubricants $1,640
Instructions
(a) Prepare a monthly flexible manufacturing overhead budget for each increment of 3,000 direct labour hours over the relevant range for the year ending December 31, 2012.
(b) Prepare a flexible budget report for October.
(c) Comment on management's efficiency in controlling manufacturing overhead costs in October.
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly