Using the information in E10-3, assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.

Instructions
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.
(c) Comment on your findings.

Data From E10-3 

Thome Company uses a fl exible 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 .................0.60
Utilities ..................................0.40

Fixed overhead costs per month are supervision $4,000, depreciation $1,200, and property taxes $800. The company believes it will normally operate in a range of 7,000–10,000 direct labor hours per month.

Instructions
Prepare a monthly manufacturing overhead flexible budget for 2014 for the expected range of activity, using increments of 1,000 direct labor hours.

Variable Costs Fixed Costs Indirect labor Indirect materials Utilities $4,000 1,200 800 $8,800 Supervision 5,300 Depreciation 3,200 Property taxes