Prepare a performance report for thorpes conversion costs

Reference no: EM13938699

FLEXIBLE BUDGETING
At the beginning of last year, Jean Bingham, controller for Thorpe Inc., prepared the fol- lowing budget for conversion costs at two levels of activity for the coming year:

Direct labor	$1,000,000	$1,200,000
Supervision	180,000	180,000
Utilities	18,000	21,000
Depreciation	225,000	225,000
Supplies	25,000	30,000
Maintenance	240,000	284,000
Rent	120,000	120,000
Other	60,000	70,000
Total manufacturing cost	$1,868,000	$2,130,000
Direct Labor Hours	100,000	120,000

During the year, the company worked a total of 112,000 direct labor hours and incurred the following actual costs:

Direct labor	$963,200
Supervision	190,000
Utilities	20,500
Depreciation	225,000
Supplies	24,640
Maintenance	237,000
Rent	120,000
Other	60,500

Thorpe applied overhead on the basis of direct labor hours. Normal volume of 120,000 direct labor hours is the activity level to be used to compute the predetermined overhead rate.

Required:

1. Determine the cost formula for each of Thorpe's conversion costs. (Hint: Use the high-low method.)

2. Prepare a performance report for Thorpe's conversion costs for last year. Should any cost item be given special attention? Explain.

Reference no: EM13938699

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