Bumblebee Company estimates that 402,100 direct labor hours will be worked during the coming year, 2020, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year. Fixed Overhead Costs Variable Overhead Costs Supervision $ 91,800 Indirect labor $ 184,966 Depreciation 69,960 Indirect materials 104,546 Insurance 32,040 Repairs 64,336 Rent 22,560 Utilities 60,315 Property taxes 22,680 Lubricants 40,210 $ 239,040 $ 454,373 It is estimated that direct labor hours worked each month will range from 20,400 to 30,000 hours. During October, 20,400 direct labor hours were worked and the following overhead costs were incurred. Fixed overhead costs: Supervision $ 7,650, Depreciation $ 5,830, Insurance $ 2,615, Rent $ 1,880, and Property taxes $ 1,890. Variable overhead costs: Indirect labor $ 10,484, Indirect materials, $ 4,874, Repairs $ 3,214, Utilities $ 3,370, and Lubricants $ 2,380. (a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,200 direct labor hours over the relevant range for the year ending December 31, 2020.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Bumblebee Company estimates that 402,100 direct labor hours will be worked during the coming year, 2020, in the Packaging Department. On this basis, the following budgeted
|
Fixed Overhead Costs
|
Variable Overhead Costs
|
|||||
|---|---|---|---|---|---|---|
| Supervision |
$ 91,800
|
Indirect labor |
$ 184,966
|
|||
|
69,960
|
Indirect materials |
104,546
|
||||
| Insurance |
32,040
|
Repairs |
64,336
|
|||
| Rent |
22,560
|
Utilities |
60,315
|
|||
| Property taxes |
22,680
|
Lubricants |
40,210
|
|||
|
$ 239,040
|
$ 454,373
|
It is estimated that direct labor hours worked each month will range from 20,400 to 30,000 hours.
During October, 20,400 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: Supervision $ 7,650, Depreciation $ 5,830, Insurance $ 2,615, Rent $ 1,880, and Property taxes $ 1,890.
Variable overhead costs: Indirect labor $ 10,484, Indirect materials, $ 4,874, Repairs $ 3,214, Utilities $ 3,370, and Lubricants $ 2,380.
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,200 direct labor hours over the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)
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