P10-1B Speier Company estimates that 240,000 direct labor hours will be worked during 2014 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	Â	Supervision	$  75,600
Indirect materials	48,000	Â	Depreciation	30,000
Repairs	36,000	Â	Insurance	12,000
Utilities	24,000	Â	Rent	9,600
Lubricants	12,000	Â	Property taxes	6,000
Â	$192,000	Â	Â	$133,200

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             $ 6,300 Indirect materials                            3,600                Depreciation                2,500

Repairs                                 2,300                Insurance                      1,000

Utilities                                1,700                Rent                                  850

Lubricants                            1,050                Property taxes                500

$14,850                                                   $11,150

 

Instructions

(a)  Prepare a monthly flexible manufacturing overhead budget for each increment of 2,000 direct labor hours over the relevant range for the year ending December 31, 2014.

(b)  Prepare a manufacturing overhead budget report for January.

(c)   Comment on management’s efficiency in controlling manufacturing over- head costs in January.