Managerial Accounting
E24-4  Prepare flexible budget reports for manufacturing overhead costs, and comment on findings
Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours.  Variable manufacturing overhead costs per direct labor hour are as follows.
Indirect labor  $1.00
Indirect materials  $0.60
Utilities  $0.40

Fixed overhead costs per month are supervision $4,000, depreciation, $1,200, and property taxes $800.  The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.

Using the information above, assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.
Variable Costs Fixed Costs
Indirect labor  $8,800  Supervision  $4,000
Indirect materials  5,300  Depreciation  1,200
Utilities  3,200  Property taxes  800

Instructions
(a)  Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.
(b)  Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.
(c )  Comment on your findings.