E10-4 (a,b)
Raney Company uses a flexible budget for manufacturing overheadbased on direct labor hours. Variable manufacturing overhead costsper direct labor hour are as follows.
Indirect labor $1.00
Indirect materials 0.50
Utilities 0.40
Fixed overhead costs per month are: Supervision $4,000,Depreciation $1,500, and Property Taxes $800. Assume that in July2008, Raney Company incurs the following manufacturing overheadcosts.
Variable Costs
Fixed Costs
Indirect labor $8,700 Supervision $4,000
Indirect materials 4,300 Depreciation 1,500
Utilities 3,200 Property taxes 800
Prepare a flexible budget performance report, assuming that thecompany worked 9,000 direct labor hours during the month. (Ifanswer is zero, please enter 0. Do not leave any fieldsblank.)
RANEY COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2008
Difference
Budget Actual Costs Favorable F
Direct labor hours
9,000 DLH
9,000 DLH
Unfavorable U
Variable costs
Indirect labor $ $ $
Indirect materials
Utilities
Total variable costs
Fixed costs
Supervision
Depreciation
Property taxes
Total fixed costs
Total costs
$
$
$
Prepare a flexible budget performance report, assuming that thecompany worked 8,500 direct labor hours during the month.
RANEY COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2008
Difference
Budget Actual Costs Favorable F
Direct labor hours
8,500 DLH
8,500 DLH
Unfavorable U
Variable costs
Indirect labor $ $ $
Indirect materials
Utilities
Total variable costs
Fixed costs
Supervision
Depreciation
Property taxes
Total fixed costs
Total costs
$
$
$
Click here if you would like to Show Work for this question
Raney Company uses a flexible budget for manufacturing overheadbased on direct labor hours. Variable manufacturing overhead costsper direct labor hour are as follows.
Indirect labor $1.00
Indirect materials 0.50
Utilities 0.40
Fixed overhead costs per month are: Supervision $4,000,Depreciation $1,500, and Property Taxes $800. Assume that in July2008, Raney Company incurs the following manufacturing overheadcosts.
Variable Costs
Fixed Costs
Indirect labor $8,700 Supervision $4,000
Indirect materials 4,300 Depreciation 1,500
Utilities 3,200 Property taxes 800
Prepare a flexible budget performance report, assuming that thecompany worked 9,000 direct labor hours during the month. (Ifanswer is zero, please enter 0. Do not leave any fieldsblank.)
RANEY COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2008
Difference
Budget Actual Costs Favorable F
Direct labor hours
9,000 DLH
9,000 DLH
Unfavorable U
Variable costs
Indirect labor $ $ $
Indirect materials
Utilities
Total variable costs
Fixed costs
Supervision
Depreciation
Property taxes
Total fixed costs
Total costs
$
$
$
Prepare a flexible budget performance report, assuming that thecompany worked 8,500 direct labor hours during the month.
RANEY COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2008
Difference
Budget Actual Costs Favorable F
Direct labor hours
8,500 DLH
8,500 DLH
Unfavorable U
Variable costs
Indirect labor $ $ $
Indirect materials
Utilities
Total variable costs
Fixed costs
Supervision
Depreciation
Property taxes
Total fixed costs
Total costs
$
$
$
Click here if you would like to Show Work for this question
Related questions
Exercise 10-9
Lowell Companyâs manufacturing overhead budget for the firstquarter of 2014 contained the following data.
Variable Costs | Fixed Costs | |||||
Indirect materials | $11,749 | Supervisory salaries | $36,825 | |||
Indirect labor | 10,177 | Depreciation | 6,782 | |||
Utilities | 7,296 | Property taxes and insurance | 7,225 | |||
Maintenance | 5,613 | Maintenance | 4,034 | |||
Actual variable costs were: indirect materials $15,246, indirectlabor $9,315, utilities $9,022, and maintenance $4,987. Actualfixed costs equaled budgeted costs except for property taxes andinsurance, which were $8,665. The actual activity level equaled thebudgeted level.
All costs are considered controllable by the production departmentmanager except for depreciation, and property taxes andinsurance.
(a) Prepare a manufacturing overhead flexiblebudget report for the first quarter. (List variablecosts before fixed costs.)
LOWELL COMPANY | ||||
Difference | ||||
|
| Favorable F | ||
Fixed CostsDepreciationTotal CostsIndirect LaborTotal FixedCostsMaintenanceIndirect MaterialsProperty Taxes andInsuranceSupervisory SalariesTotal Variable CostsUtilitiesVariableCosts | ||||
Total Variable CostsIndirect MaterialsSupervisorySalariesUtilitiesVariable CostsFixed CostsMaintenanceIndirectLaborProperty Taxes and InsuranceDepreciationTotal CostsTotal FixedCosts | $ | $ | $ | FUN |
Indirect LaborTotal Variable CostsTotalCostsDepreciationIndirect MaterialsTotal FixedCostsMaintenanceProperty Taxes and InsuranceUtilitiesSupervisorySalariesVariable CostsFixed Costs | FUN | |||
MaintenanceSupervisory SalariesTotal CostsIndirect LaborTotalVariable CostsTotal Fixed CostsIndirect MaterialsUtilitiesPropertyTaxes and InsuranceVariable CostsDepreciationFixed Costs | FUN | |||
Supervisory SalariesTotal CostsVariable CostsTotal VariableCostsIndirect MaterialsMaintenanceUtilitiesDepreciationPropertyTaxes and InsuranceTotal Fixed CostsFixed CostsIndirect Labor | FUN | |||
Supervisory SalariesIndirect MaterialsIndirectLaborMaintenanceDepreciationTotal Fixed CostsVariable CostsTotalVariable CostsProperty Taxes and InsuranceFixed CostsUtilitiesTotalCosts | FUN | |||
UtilitiesIndirect MaterialsTotal Fixed CostsMaintenanceTotalVariable CostsDepreciationProperty Taxes and InsuranceSupervisorySalariesVariable CostsFixed CostsIndirect LaborTotal Costs | ||||
Total Fixed CostsTotal Variable CostsProperty Taxes andInsuranceMaintenanceSupervisory SalariesIndirect MaterialsTotalCostsVariable CostsUtilitiesDepreciationIndirect LaborFixedCosts | FUN | |||
MaintenanceIndirect LaborUtilitiesVariable CostsIndirectMaterialsTotal Variable CostsProperty Taxes and InsuranceTotalFixed CostsFixed CostsSupervisory SalariesDepreciationTotalCosts | FUN | |||
UtilitiesTotal CostsTotal Fixed CostsSupervisory SalariesTotalVariable CostsVariable CostsIndirect LaborDepreciationFixedCostsIndirect MaterialsMaintenanceProperty Taxes and Insurance | FUN | |||
UtilitiesSupervisory SalariesVariable CostsProperty Taxes andInsuranceTotal Fixed CostsDepreciationTotal CostsTotal VariableCostsFixed CostsIndirect LaborIndirect MaterialsMaintenance | FUN | |||
Total Variable CostsSupervisory SalariesTotalCostsUtilitiesIndirect MaterialsVariable CostsIndirect LaborTotalFixed CostsMaintenanceProperty Taxes and InsuranceDepreciationFixedCosts | FUN | |||
Total Variable CostsDepreciationFixedCostsMaintenanceSupervisory SalariesTotal CostsProperty Taxes andInsuranceUtilitiesVariable CostsTotal Fixed CostsIndirectLaborIndirect Materials | $ | $ | $ | FUN |
(b) Prepare a responsibility report for the firstquarter.
LOWELL COMPANY | ||||
Difference | ||||
|
|
| Favorable F | |
DepreciationIndirect LaborUtilitiesMaintenanceSupervisorySalariesIndirect MaterialsProperty Taxes and Insurance | $ | $ | $ | FUN |
Indirect LaborMaintenanceProperty Taxes andInsuranceDepreciationSupervisory SalariesUtilitiesIndirectMaterials | FUN | |||
UtilitiesIndirect LaborMaintenanceIndirect MaterialsSupervisorySalariesProperty Taxes and InsuranceDepreciation | FUN | |||
Property Taxes and InsuranceIndirectLaborUtilitiesDepreciationSupervisory SalariesIndirectMaterialsMaintenance | FUN | |||
UtilitiesProperty Taxes and InsuranceDepreciationSupervisorySalariesMaintenanceIndirect MaterialsIndirect Labor | FUN | |||
$ | $ | $ | FUN | |
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Exercise 10-9
Lowell Companyâs manufacturing overhead budget for the firstquarter of 2014 contained the following data.
Variable Costs | Fixed Costs | |||||
Indirect materials | $11,004 | Supervisory salaries | $35,170 | |||
Indirect labor | 10,758 | Depreciation | 6,084 | |||
Utilities | 7,760 | Property taxes and insurance | 7,986 | |||
Maintenance | 5,575 | Maintenance | 5,566 | |||
Actual variable costs were: indirect materials $15,083, indirectlabor $9,497, utilities $9,235, and maintenance $5,111. Actualfixed costs equaled budgeted costs except for property taxes andinsurance, which were $8,225. The actual activity level equaled thebudgeted level.
All costs are considered controllable by the production departmentmanager except for depreciation, and property taxes andinsurance.
(a) Prepare a manufacturing overhead flexiblebudget report for the first quarter. (List variablecosts before fixed costs.)
LOWELL COMPANY | ||||
Difference | ||||
|
| Favorable F | ||
MaintenanceProperty Taxes and InsuranceVariable CostsSupervisorySalariesTotal CostsTotal Fixed CostsTotal VariableCostsUtilitiesIndirect MaterialsDepreciationFixed CostsIndirectLabor | ||||
Total Fixed CostsTotal CostsMaintenanceSupervisorySalariesProperty Taxes and InsuranceIndirect LaborFixedCostsVariable CostsDepreciationUtilitiesTotal VariableCostsIndirect Materials | $ | $ | $ | FUN |
MaintenanceTotal Fixed CostsTotalCostsUtilitiesDepreciationSupervisory SalariesFixed CostsIndirectLaborProperty Taxes and InsuranceIndirect MaterialsTotal VariableCostsVariable Costs | FUN | |||
Total Variable CostsUtilitiesVariable CostsMaintenanceTotalCostsProperty Taxes and InsuranceSupervisory SalariesTotal FixedCostsDepreciationFixed CostsIndirect LaborIndirect Materials | FUN | |||
Indirect LaborProperty Taxes and InsuranceSupervisorySalariesTotal CostsTotal Fixed CostsUtilitiesIndirectMaterialsMaintenanceFixed CostsTotal Variable CostsVariableCostsDepreciation | FUN | |||
Property Taxes and InsuranceVariable CostsSupervisorySalariesTotal CostsTotal Variable CostsUtilitiesIndirectMaterialsTotal Fixed CostsDepreciationMaintenanceIndirectLaborFixed Costs | FUN | |||
Supervisory SalariesTotal CostsTotal Fixed CostsMaintenanceTotalVariable CostsUtilitiesProperty Taxes and InsuranceVariableCostsDepreciationFixed CostsIndirect LaborIndirect Materials | ||||
DepreciationTotal CostsSupervisory SalariesMaintenanceVariableCostsFixed CostsProperty Taxes and InsuranceUtilitiesIndirectLaborTotal Fixed CostsTotal Variable CostsIndirect Materials | FUN | |||
MaintenanceTotal Variable CostsProperty Taxes andInsuranceSupervisory SalariesFixed CostsTotalCostsDepreciationTotal Fixed CostsIndirect LaborUtilitiesVariableCostsIndirect Materials | FUN | |||
Property Taxes and InsuranceSupervisory SalariesIndirectMaterialsIndirect LaborTotal CostsUtilitiesTotal Fixed CostsFixedCostsMaintenanceVariable CostsDepreciationTotal Variable Costs | FUN | |||
UtilitiesSupervisory SalariesMaintenanceVariable CostsIndirectLaborTotal Variable CostsTotal CostsProperty Taxes andInsuranceDepreciationFixed CostsIndirect MaterialsTotal FixedCosts | FUN | |||
Variable CostsProperty Taxes and InsuranceDepreciationIndirectMaterialsFixed CostsIndirect LaborUtilitiesMaintenanceSupervisorySalariesTotal CostsTotal Fixed CostsTotal Variable Costs | FUN | |||
Indirect MaterialsVariable CostsMaintenanceSupervisorySalariesIndirect LaborTotal Variable CostsDepreciationPropertyTaxes and InsuranceTotal CostsFixed CostsTotal FixedCostsUtilities | $ | $ | $ | FUN |
(b) Prepare a responsibility report for the firstquarter.
LOWELL COMPANY | ||||||
Difference | ||||||
|
|
| Favorable F | |||
Indirect LaborIndirect MaterialsMaintenanceSupervisorySalariesUtilitiesProperty Taxes and InsuranceDepreciation | $ | $ | $ | FUN | ||
Supervisory SalariesMaintenanceUtilitiesIndirectMaterialsProperty Taxes and InsuranceDepreciationIndirect Labor | FUN | |||||
MaintenanceIndirect LaborIndirect MaterialsProperty Taxes andInsuranceSupervisory SalariesUtilitiesDepreciation | FUN | |||||
Property Taxes and InsuranceUtilitiesMaintenanceSupervisorySalariesDepreciationIndirect MaterialsIndirect Labor | FUN | |||||
MaintenanceSupervisory SalariesIndirect MaterialsProperty Taxesand InsuranceUtilitiesDepreciationIndirect Labor | FUN | |||||
$ | $ | $ | FUN | |||
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Exercise 10-14
The Mixing Department manager of Malone Company is able tocontrol all overhead costs except rent, property taxes, andsalaries. Budgeted monthly overhead costs for the MixingDepartment, in alphabetical order, are:
Indirect labor | $12,870 | Property taxes | $1,150 | |||
Indirect materials | 7,980 | Rent | 1,840 | |||
Lubricants | 2,600 | Salaries | 11,860 | |||
Maintenance | 3,820 | Utilities | 6,550 |
Actual costs incurred for January 2014 are indirect labor $13,970;indirect materials $14,070; lubricants $2,070; maintenance $3,820;property taxes $2,050; rent $1,840; salaries $11,860; and utilities$6,540.
Prepare a responsibility report for January 2014.
MALONE COMPANY | ||||
Difference | ||||
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|
| Favorable F | |
SalariesIndirect MaterialsLubricantsMaintenanceUtilitiesIndirectLaborProperty TaxesRent | $ | $ | $ | FNU |
SalariesProperty TaxesRentUtilitiesIndirect LaborIndirectMaterialsLubricantsMaintenance | NUF | |||
Indirect MaterialsLubricantsRentUtilitiesPropertyTaxesSalariesMaintenanceIndirect Labor | NFU | |||
RentLubricantsSalariesUtilitiesIndirect LaborPropertyTaxesIndirect MaterialsMaintenance | UFN | |||
Indirect LaborRentUtilitiesIndirectMaterialsLubricantsMaintenanceProperty TaxesSalaries | FUN | |||
$ | $ | $ | UFN | |
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Exercise 10-19
The Pletcher Transportation Company uses a responsibilityreporting system to measure the performance of its three investmentcenters: Planes, Taxis, and Limos. Segment performance is measuredusing a system of responsibility reports and return on investmentcalculations. The allocation of resources within the company andthe segment managersâ bonuses are based in part on the resultsshown in these reports.
Recently, the company was the victim of a computer virus thatdeleted portions of the companyâs accounting records. This wasdiscovered when the current periodâs responsibility reports werebeing prepared. The printout of the actual operating resultsappeared as follows.
Determine the missing pieces of information below.(Round intermediate calculations and final answer to 0decimal places, e.g. 1,255.)
Planes | Taxis | Limos | |||||||
Service revenue | $ | $501,500 | $ | ||||||
Variable costs | 5,506,800 | 300,500 | |||||||
Contribution margin | 246,200 | 515,892 | |||||||
Controllable fixed costs | 1,499,800 | ||||||||
Controllable margin | 76,100 | 271,692 | |||||||
Average operating assets | 24,952,000 | 1,509,400 | |||||||
Return on investment | 13 | % | 8 | % | % | ||||
Baxter's Inc. estimates that 376,800 direct labor hours will beworked during the coming year, 2014, in the Packaging Department.On this basis, the following budgeted manufacturing overhead costdata are computed for the year.
Fixed Overhead Costs | Variable Overhead Costs | |||||
| Supervision | $94,320 | Indirect labor | $131,880 | |||
| Depreciation | 62,160 | Indirect materials | 79,128 | |||
| Insurance | 30,360 | Repairs | 45,216 | |||
| Rent | 21,840 | Utilities | 90,432 | |||
| Property taxes | 22,320 | Lubricants | 26,376 | |||
$231,000 | $373,032 | |||||
It is estimated that direct labor hours worked each month willrange from 29,900 to 38,000 hours.
During October, 29,900 direct labor hours were worked and thefollowing overhead costs were incurred.
Fixed overhead costs: supervision $7,860, depreciation$5,180, insurance $2,503, rent $1,820, and property taxes$1,860.
Variable overhead costs: indirect labor $11,423, indirectmaterials, $5,939, repairs $3,534, utilities $7,452, and lubricants$2,508.
1. Prepare a monthly manufacturing overhead flexible budget foreach increment of 2,700 direct labor hours over the relevant rangefor the year ending December 31, 2014. (List variablecosts before fixed costs.)
2. Prepare a flexible budget report for October.(List variable costs before fixed costs. If answer iszero, please enter 0, do not leave any fieldsblank.)
3. Comment on managementâs efficiency in controllingmanufacturing overhead costs in October.
