Preparing a Flexible Budget for Performance Reporting Suppose you receive the following performance report from the accounting department for your first month as plant manager for a new company. Your supervisor, the vic performance in the area of cost control. Units Actual 10,000 Budgeted Variance 12,000 2,000 U Costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total costs $717,600 $864,000 $146,400 F $829,200 $1,036,800 $207,600 F $432,000 $518,400 $86,400 F $900,000 $864,000 $36,000 U $2,878,800 $3,283,200 $404,400 F REQUIRED Prepare a variance analysis Note: Do not use negative signs with your answers. Units (in cases) Costs: Static Budget Activity Variance 12,000 Flexible Budget Flexible Budget Variance 10,000 Actual 2,000 x Static (Total) Variance Direct materials $ 864,000 Direct labor $ 1,036,800 $ $ 146,400 x F 207,600 x F 864,000 x $ 146,400 x F ÷ 1,036,800 * $ 207,600 x F ÷ Variable overhead $ 518,400 $ 86,400 F ÷ 518,400 x $ 86,400 x $ Fixed overhead $ 864,000 $ 36,000 x $ 864,000 $ 36,000 U ÷ Total costs $ 3283200 $ 476400 F 3283200 $ 404400 F 717,600 $ 829,200 $ 432,000 900,000 2878800 $ 146,400 F 207,600 F ÷ ÷ 86,400 F $ 36,000 U 404400 F ÷

Preparing a Flexible Budget for Performance Reporting Suppose you receive the following performance report from the accounting department for your first month as plant manager for a new company. Your supervisor, the vic performance in the area of cost control. Units Actual 10,000 Budgeted Variance 12,000 2,000 U Costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total costs $717,600 $864,000 $146,400 F $829,200 $1,036,800 $207,600 F $432,000 $518,400 $86,400 F $900,000 $864,000 $36,000 U $2,878,800 $3,283,200 $404,400 F REQUIRED Prepare a variance analysis Note: Do not use negative signs with your answers. Units (in cases) Costs: Static Budget Activity Variance 12,000 Flexible Budget Flexible Budget Variance 10,000 Actual 2,000 x Static (Total) Variance Direct materials $ 864,000 Direct labor $ 1,036,800 $ $ 146,400 x F 207,600 x F 864,000 x $ 146,400 x F ÷ 1,036,800 * $ 207,600 x F ÷ Variable overhead $ 518,400 $ 86,400 F ÷ 518,400 x $ 86,400 x $ Fixed overhead $ 864,000 $ 36,000 x $ 864,000 $ 36,000 U ÷ Total costs $ 3283200 $ 476400 F 3283200 $ 404400 F 717,600 $ 829,200 $ 432,000 900,000 2878800 $ 146,400 F 207,600 F ÷ ÷ 86,400 F $ 36,000 U 404400 F ÷

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Is Mr. Richardson correct in his conclusion that something is wrong with the company’s performance evaluation process?
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The cheque-clearing office of Pay Loans Company is responsible for processing all cheques that come to the company for payment. Managers at the company believe that variable overhead costs are essentially proportional to the number of labour-hours worked in the office, so labour-hours are used as the activity base when preparing variable overhead budgets and performance reports. Data for October, the most recent month, appear below: Budgeted labour-hours 1,330 Actual labour-hours 1,285 Standard labour-hours allowed for the actual number of cheques processed 1,350 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual Costs (per Incurred labour- hour) in October $ 0.60 0.20 2.20 $ 780 $ 3.00 317 3,527 $4,624 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $7 per direct labour-hour. Actual fixed overhead costs totalled $7,350 in October, while the flexible…
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