Question

Gundy Company expects to produce 1,304,400 units of Product XX in 2020. Monthly production is expected to range from 87,000 to 127,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $7, and overhead $9. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision are $1.

In March 2020, the company incurs the following costs in producing 107,000 units: direct materials $455,000, direct labor $746,000, and variable overhead $971,000. Actual fixed costs were equal to budgeted fixed costs.

Prepare a flexible budget report for March. (List variable costs before fixed costs.)

GUNDY COMPANY Manufacturing Flexible Budget Report For the Month Ended March 31, 2020
					Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
Select an opening flexible budget item DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable CostsUnits Produced	Enter a number		Enter a number
Select an opening name for section one DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable CostsUnits Produced
Select a flexible budget item     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	$Enter a dollar amount		$Enter a dollar amount		$Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a flexible budget item     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	Enter a dollar amount		Enter a dollar amount		Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a flexible budget item     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	Enter a dollar amount		Enter a dollar amount		Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a closing name for section one     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	$Enter a total amount for section one		$Enter a total amount for section one		$Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select an opening name for section two DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable CostsUnits Produced
Select a flexible budget item     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	Enter a dollar amount		Enter a dollar amount		Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a flexible budget item     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	Enter a dollar amount		Enter a dollar amount		Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a closing name for section two     Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Variable Costs    Units Produced	Enter a total amount for section two		Enter a total amount for section two		Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable
Select a closing flexible budget item DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable CostsUnits Produced	$Enter a total dollar amount		$Enter a total dollar amount		$Enter the difference	Select an option FavorableUnfavorableNeither Favorable nor Unfavorable

Were costs controlled? Select an option

YesNo

Answer 1

Solution:

Gundy Company

Manufacturing Flexible Budget Report

For the Month Ended March 31, 2020

	Budget	Actual	Difference Favorable, or Unfavorable, or Neither Favorable nor unfavorable
Units produced	107,000	107,000
Variable Costs:
Direct Materials	$428,000($4 × 107,000)	$455,000	$27,000	Unfavorable
Direct labor	$749,000($7 × 107,000)	$746,000	$3,000	Favorable
Overhead	$963,000($9 × 107,000)	$971,000	$8,000	Unfavorable
Total variable costs	$2,140,000	$2,172,000	$32,000	Unfavorable
Fixed Costs:
Depreciation	$434,800	$434,800	0	Neither favorable or nor unfavorable
Supervision	$108,700	$108,700	0	Neither favorable or nor unfavorable
Total fixed costs	$543,500	$543,500	0	Neither favorable or nor unfavorable
Total costs	$2,683,500	$2,715,500	$32,000	Unfavorable

* Depreciation = (1,304,400 × $4) ÷ 12

=$5,217,600 ÷ 12

=$434,800

Supervision =(1,304,400 × $1) ÷ 12

= $1,304,400 ÷ 12

=$108,700

No, costs were not controlled because evidenced by the difference between budgeted and actual for the variable costs.

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