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Gonzalez Company 300000

Price: $2.50

Gonzalez Company produces one product, Olpe. Because of wide fluctuations in
demand for Olpe, the Assembly Department experiences significant variations in monthly
production levels.

Overhead Costs Master Budget Actual in July
 Indirect labor   300,000  26,000
 Indirect materials   150,000  11,350
 Utilities   90,000  8,050
 Maintenance   60,000  5,400
 Supervision   144,000  12,000
 Depreciation   96,000  8,000
Insurance and taxes   60,000  5,000
Total   900,000  75,800

The annual master manufacturing overhead budget is based on 300,000 direct labor
hours. In July, 27,500 labor hours were worked. The master manufacturing overhead budget
for the year and the actual overhead costs incurred in July are as follows.

(a) Prepare a monthly flexible overhead budget for the year ending December 31, 2014,
assuming monthly production levels range from 22,500 to 30,000 direct labor hours.
Use increments of 2,500 direct labor hours.

(b) Prepare a budget report for the month of July 2014, comparing actual results with
budget data based on the flexible budget.

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