Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2017 contained the following data.

Variable Costs

Fixed Costs

Indirect materials $11,100 Supervisory salaries $36,700
Indirect labor 11,000 Depreciation 6,100
Utilities 7,700 Property taxes and insurance 7,400
Maintenance 5,500 Maintenance 4,900

Actual variable costs were indirect materials $14,800, indirect labor $9,200, utilities $9,300, and maintenance $5,200. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,400. The actual activity level equaled the budgeted level.

All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.

(a) Prepare a manufacturing overhead flexible budget report for the first quarter. (List variable costs before fixed costs.)

(b) Prepare a responsibility report for the first quarter.

Answer and Explanation:

a. The preparation manufacturing overhead flexible budget report is shown below:-

                  Manufacturing overhead flexible budget report

                                      Budget    Actual    Favorable (unfavorable)  

Variable costs      

Indirect materials            $11,100    $14,800  $3,700 U  

Indirect labor                  $11,000    $9,200  $1,800 F  

Utilities                            $7,700     $9,300   $1,600 U  

Maintenance                   $5,500    $5,200   $300 F  

Total variable cost          $35,300  $38,500 $3,200 U  

Fixed expense      

Supervisory salaries       $36,700    $36,700   0    

Depreciation                    $6,100       $6,100      0    

Property ,taxes                $7,400       $8,400  $1,000 U  

Maintenance                    $4,900       $4,900      0    

total fixed expense         $55,100       $56,100 $1,000 U  

total controllable cost  $90,400      $94,600  $4200 U

b. The preparation of Manufacturing overhead Responsibility report is shown below:-

Controllable costs     Budget      Actual     Favorable(unfavorable)  

Indirect materials       $11,100      $14,800     $3,700 U  

Indirect labor              $11,000      $9,200     $1,800 F

Utilities                         $7,700      $9,300     $1,600 U  

Maintenance                $10,400     $10,100   $300   F  

Supervisory salaries     $36,700   $36,700    0    

Total                        $76,900   $80,100   $3200 U