Ogleby Company estimates that 240,000 direct labor hours will be worked during 2010 in the Assembly Department. On this basis, the following budgeted manufacturing overhead data are computed.
|
Variable Overhead Costs |
Fixed Overhead Costs |
||
|
Indirect labor |
$ 72,000 |
Supervision |
$ 75,000 |
|
Indirect materials |
48,000 |
Depreciation |
30,000 |
|
Repairs |
36,000 |
Insurance |
12,000 |
|
Utilities |
26,400 |
Rent |
9,000 |
|
Lubricants |
9,600 |
Property taxes |
6,000 |
|
$192,000 |
$132,000 |
||
It is estimated that direct labor hours worked each month will range from 18,000 to 24,000 hours. During January, 20,000 direct labor hours were worked and the following overhead costs were incurred.
|
Variable Overhead Costs |
Fixed Overhead Costs |
||
|
Indirect labor |
$ 6,200 |
Supervision |
$ 6,250 |
|
Indirect materials |
3,600 |
Depreciation |
2,500 |
|
Repairs |
2,400 |
Insurance |
1,000 |
|
Utilities |
1,700 |
Rent |
850 |
|
Lubricants |
830 |
Property taxes |
500 |
|
$14,730 |
$11,100 |
||
Instructions
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,000 direct labor hours over the relevant range for the year ending December 31, 2010.
(b) Prepare a manufacturing overhead budget report for January.
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in January.