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E24-4 Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours

E24-4 Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours
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E24-4 Raney 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 0.50
Utilities 0.40

Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500 and Property Taxes $800. The company believes it will normally operate in a range of 7,000-10,000 direct labor hours per month. Assume that in July 2010, Raney Company incurs the following manufacturing overhead costs.

Variable Costs
Fixed Costs

Indirect labor $8,700 Supervision $4,000
Indirect materials 4,300 Depreciation 1,500
Utilities 3,200 Property taxes 800

a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month. (If answer is zero, please enter 0 as the amount. Enter NA as the variance. Do not leave any fields blank. Enter all amounts as positive amounts.)

b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.

c) Comment on your finding

 

FILE: MS WORD

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