Question

Waterways

Waterways Corporation is continuing its budget preparations. Waterways had the following static budget and actual overhead for March. (Refer to Waterways 9 if you are uncertain about variable versus fixed costs.)

Waterways Corporation                                                     Waterways Corporation

Manufacturing Overhead Budget Manufacturing Overhead Costs (Actual)

(Static) For the Month of March For the Month of March

Budgeted Production (Units)	118,000		Production in units	118,500
Indirect materials	$ 5,900		Indirect materials	$ 5,910
Indirect labor	14,160		Indirect labor	14,195
Utilities	11,800		Utilities	11,880
Maintenance	8,260		Maintenance	8,275
Salaries	42,000		Salaries	42,100
Depreciation	16,800		Depreciation	16,800
Property taxes	3,000		Property taxes	3,000
Insurance	1,200		Insurance	1,200
Janitorial	1,500		Janitorial	1,650
Total budgeted costs	$104,620		Total costs	$105,010

Waterways produced 118,500 units in March rather than the budgeted number of units.

Instructions:

a. Prepare a flexible budget overhead budget based on the following amounts produced.

            (1) 115,000 units

            (2) 116,000 units

            (3) 117,000 units

            (4) 118,000 units

            (5) 119,000 units

b. Prepare a flexible budget performance report showing the differences (favorable and unfavorable) in manufacturing overhead costs for the month of March.

c. Prepare a responsibility report for the manufacturing overhead for March assuming only variable costs are controllable.

Answer 1

a) Water Way Corporation
Manufacturing Overhead Flexible Budget
		Prodution Unit
Production in Unit	Per Unit Cost	118000	115000	116000	117000	118500	119000
Variable Cost
Indirect Materal	$0.05	$5,900	$5,750	$5,800	$5,850	$5,925	$5,950
Indirect Labour	$0.12	$14,160	$13,800	$13,920	$14,040	$14,220	$14,280
Utilities	$0.10	$11,800	$11,500	$11,600	$11,700	$11,850	$11,900
Maintainance	$0.07	$8,260	$8,050	$8,120	$8,190	$8,295	$8,330
Fixed Cost
Salaries		$42,100	$42,100	$42,100	$42,100	$42,100	$42,100
Depreciation		$16,800	$16,800	$16,800	$16,800	$16,800	$16,800
Property Tax		$3,000	$3,000	$3,000	$3,000	$3,000	$3,000
Insurance		$1,200	$1,200	$1,200	$1,200	$1,200	$1,200
Janitorial		$1,650	$1,650	$1,650	$1,650	$1,650	$1,650
Total Budgeted Cost		$1,04,870	$1,03,850	$1,04,190	$1,04,530	$1,05,040	$1,05,210

b) Water Way Corporation
Manufacturing Overhead Flexible Budget Report
		Budget	Actual	Difference
Production in Unit		118500	118500
Variable Cost
Indirect Materal		$5,925	$5,910	$15	F
Indirect Labour		$14,220	$14,195	$25	F
Utilities		$11,850	$11,880	-$30	U
Maintainance		$8,295	$8,275	$20	F
Fixed Cost
Salaries		$42,100	$42,100	$0
Depreciation		$16,800	$16,800	$0
Property Tax		$3,000	$3,000	$0
Insurance		$1,200	$1,200	$0
Janitorial		$1,650	$1,650	$0
Total Budgeted Cost		$1,05,040	$1,05,010	$30	F

Waterway Corporation
Responsibility Report
Manufacturing Overhead
Controllable Cost	Budget	Actual	Difference
Indirect Materal	$5,925	$5,910	$15	F
Indirect Labour	$14,220	$14,195	$25	F
Utilities	$11,850	$11,880	-$30	U
Maintainance	$8,295	$8,275	$20	F
	$40,290	$40,260	$30	F