The annual master manufacturing overhead budget is based on 300,000 direct labour hours. In July, 27,500 labour hours were worked. The master manufacturing overhead budget for the year and the actual overhead costs incurred in July are as follows: Overhead Costs Master Budget (annual) Actual in July Variable     Indirect labour 330,000 $29,000 Indirect materials 180,000 14,000 Utilities 150,000 13,900 Maintenance 90,000 8,350 Fixed     Supervision 150,000 12,500 Depreciation 96,000 8,000 Insurance and taxes 60,000 5,000 Total $1,056,000 $90,750   Required:  Prepare a monthly flexible overhead budget for the year ending December 31, 2020, assuming monthly production levels range from 22,500 to 30,000 direct labour hours. Use increments of 2,500 direct labour hours. Prepare a budget performance report for the month of July 2020, comparing actual results with budgeted data, based on the flexible budget.

Question

MCC Company produces one product, Motorbikes. Because of wide fluctuations in the demand for Motorbikes, the assembly department has significant variations in its monthly production levels The annual master manufacturing overhead budget is based on 300,000 direct labour hours. In July, 27,500 labour hours were worked. The master manufacturing overhead budget for the year and the actual overhead costs incurred in July are as follows:

Overhead Costs

Master Budget (annual)

Actual in July

Variable

   

Indirect labour

330,000

$29,000

Indirect materials

180,000

14,000

Utilities

150,000

13,900

Maintenance

90,000

8,350

Fixed

   

Supervision

150,000

12,500

Depreciation

96,000

8,000

Insurance and taxes

60,000

5,000

Total

$1,056,000

$90,750

 

Required: 

  1. Prepare a monthly flexible overhead budget for the year ending December 31, 2020, assuming monthly production levels range from 22,500 to 30,000 direct labour hours. Use increments of 2,500 direct labour hours.
  2. Prepare a budget performance report for the month of July 2020, comparing actual results with budgeted data, based on the flexible budget.

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