Exercise 16-34 (Algo) Flexible Budget (LO 16-2) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 138,000 liters at a budgeted price of $360 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials (2 pounds @ $23) $ 46 Direct labor (0.5 hours @ $62) 31 Variable overhead is applied based on direct labor hours. The variable overhead rate is $210 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $105 per unit. All non-manufacturing costs are fixed and are budgeted at $3.1 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $1,068,000 unfavorable. Required Prepare a flexible budget for Paynesville for the year
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Exercise 16-34 (Algo) Flexible Budget (LO 16-2)
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The
| Direct materials | (2 pounds @ $23) | $ | 46 | |
| Direct labor | (0.5 hours @ $62) | 31 | ||
Variable
At the end of the year, the costs analyst reported that the sales activity variance for the year was $1,068,000 unfavorable.
Required
Prepare a flexible budget for Paynesville for the year. (Enter your answers in thousands of dollars.)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
