Speier Company estimates that 240,000 direct labor hours will be worked during the coming year, 2014, in the Assembly Department.

Question
P10-1B Speier Company estimates that 240,000 direct labor hours will be worked during the coming year, 2014, in the Assembly Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.
Variable Overhead Costs Fixed Overhead Costs
Indirect labor $72,000 $0.30 Supervision $75,600 $6,300
Indirect materials 48,000 $0.20 Depreciation 30,000 $2,500
Repairs 36,000 $0.15 Insurance 12,000 $1,000
Utilities 24,000 $0.10 Rent 9,600 $800
Lubricants 12,000 $0.05 Property taxes 6,000 $500
$192,000 $0.80 $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 overhead costs in January.

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