Reference no: EM131773358

Problem - Outkast Company uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour as follows:

Indirect labor $0.50

Indirect materials 1.50

Maintenance .40

Utilities .20

Budgeted fixed overhead costs per month are:

Supervision $4,000

Insurance 2,000

Property taxes 1,000

Depreciation 9,000

The company believes it will normally operate in a range of 28,000 to 35,000 machine hours per month. During the month of August, 2009, the company incurred the following manufacturing overhead costs:

Indirect Labor $14,800

Indirect Materials 44,000

Maintenance 12,000

Utilities 6,500

Supervision 4,200

Insurance 2,100

Property Taxes 800

Depreciation 8,600

Required:

a) Prepare a flexible budget report, assuming that the company used 31,000 machine hours during August.

b) Briefly discuss whether or not any items should be investigated further.