Question

Flexible Budget In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,500 + $1.25 DLH Power $0.50 DLH Indirect labor $68,400 + $2.30 DLH Rent $31,500 At the end of the year, Meliore, Inc., actually produced 310,000 units of the standard model and 115,000 of the deluxe model. The actual overhead costs incurred were: Maintenance $ 64,100 Power 12,420 Indirect labor 129,400 Rent 31,500 Required: Prepare a performance report for the period. If there is no variance, enter "0" for the amount and select "NA" in the last column. Meliore, Inc. Performance Report For the Year Ended December 31 Actual Budget Variance DLH for units produced Production costs: $ $ $ Total $ $ $

Answer 1

Meliore, Inc.					310000	X 0.05 =	15500
Performance Report					115000	X 0.08 =	9200
For the Year Ended December 31							24700
	Actual	Budget	Variance
DLH for units produced	24,700	24,700	0	NA
Production costs:
Maintenance	$        64,100	$    65,375	$    1,275	FAVORABLE
Power	12,420	12,350	70	UNFAVORABLE
Indirect labor	129,400	125,210	4,190	UNFAVORABLE
Rent	31,500	31,500	-
Total	237,420	234,435	2,985	UNFAVORABLE
COST FORMULA
Maintenance $34,500 + $1.25 DLH
Power $0.50 DLH
Indirect labor $68,400 + $2.30 DLH
Rent $31,500
34500+24700X1.25 = 65375
0.50X24700 = 12350
68400+24700X2.30 = 125210