Question

Do It! Review 10-1 Wade Company estimates that it will produce 6,000 units of product IOA during the current month. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $13, and overhead $18. Monthly budgeted fixed manufacturing overhead costs are $8,000 for depreciation and $3,800 for supervision. In the current month, Wade actually produced 6,500 units and incurred the following costs: direct materials $38,850, direct labor $76,440, variable overhead $116,640, depreciation $8,000, and supervision $4,000. Prepare a static budget report. Hint: The Budget column is based on estimated production while the Actual column is the actual cost incurred during the period. (List variable costs before fixed costs.)

Answer 1

Static budget Report
Particulars	Budget	Actual	Difference	variance
Budgeted unit	6000 units	6500 units
Direct material	$          42,000.00	$           38,850.00	$            3,150.00	Favourable
Direct labour	$          78,000.00	$           76,440.00	$            1,560.00	Favourable
Variable overheads	$        108,000.00	$         116,640.00	$          (8,640.00)	Unfavourable
Total variable overheads [a]	$      228,000.00	$       231,930.00	$          (3,930.00)	Unfavourable
Fixed manfacturing costs :
Depreciation	$           8,000.00	$             8,000.00	$                    -	Neither favourable nor unfavourable
Supervision	$           3,800.00	$             4,000.00	$             (200.00)	Unfavourable
Total fixed overheads [b]	$        11,800.00	$          12,000.00	$             (200.00)	Unfavourable
Total overheads [a]+[b]	$        239,800.00	$         243,930.00	$          (4,130.00)	Unfavourable
Since the total overheads are unfavorable, the costs are not controllable.
Notes :
Budgeted unit	6000 units
Direct material	6000*7	$           42,000.00
Direct labour	6000*13	$           78,000.00
Variable overheads	6000*18	$         108,000.00