Question
In: Accounting
Scenario: Good Woods Inc. is a manufacturer of cabinetry products. The company uses a flexible budget...
Scenario: Good Woods Inc. is a manufacturer of cabinetry products. The company uses a flexible budget for manufacturing overhead based on direct labor hours. For 2019, the master overhead budget for the Assembly Department based on 300,000 direct labor hours was as follows:
Variable Costs:
Indirect Labor $362,000
Materials $148,000
Maintenance $210,000
Utilities $120,000
Fixed Costs:
Supervision $60,000
Depreciation $22,000
Property Taxes $18,000
Insurance $13,000
During August, 24,000 direct labor hours were worked. The company incurred the following variable costs in August: indirect labor $30,200; materials $12,000; maintenance $17,000 and; utilities $9,500. Actual fixed overhead costs were the same as the monthly budgeted fixed costs.
You have been tasked with preparing a flexible budget and assessing the Assembly Department’s supervisor performance. Please respond each question below:
- Prepare a flexible budget for the Assembly Department for the month of August.
- Identify the difference between budgeted and actual costs as favorable or unfavorable.
- Did the supervisor do a good, average or poor job in controlling expenses? Explain your rationale.
- Would you recommend that the Assembly Department uses a static budget instead? Why or why not?
- What type of responsibility center do you believe that the Assembly Department is? Explain your rationale.
Solutions
Expert Solution
| Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks! |
| Good Woods Inc. | |||||
| Calculation of overhead rates | Indirect Labor | Materials | Maintenance | Utilities | Note |
| Budgeted costs | 362,000.00 | 148,000.00 | 210,000.00 | 120,000.00 | A |
| Budgeted direct labor hours | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 | B |
| Overhead rate | 1.21 | 0.49 | 0.70 | 0.40 | C=A/B |
| Calculation for flexible budget: | A | B= 24,000* A |
| Items | Overhead rate | Variable Cost |
| Labor Hours | 24,000.00 | |
| Indirect Labor | 1.21 | 28,960.00 |
| Materials | 0.49 | 11,840.00 |
| Maintenance | 0.70 | 16,800.00 |
| Utilities | 0.40 | 9,600.00 |
| Flexible budget: | |
| Items | Amount $ |
| Indirect Labor | 28,960.00 |
| Materials | 11,840.00 |
| Maintenance | 16,800.00 |
| Utilities | 9,600.00 |
| Supervision | 60,000.00 |
| Depreciation | 22,000.00 |
| Property taxes | 18,000.00 |
| Insurance | 13,000.00 |
| Total Expense | 180,200.00 |
| Answer 3 | ||||
| Flexible budget variance report: | Flexible budget Variance | |||
| Particulars | Actual Results | Flexible budget | Amount | Remarks |
| Labor Hours | 24,000.00 | 24,000.00 | ||
| Expenses: | ||||
| Indirect Labor | 30,200.00 | 28,960.00 | 1,240.00 | Unfavorable |
| Materials | 12,000.00 | 11,840.00 | 160.00 | Unfavorable |
| Maintenance | 17,000.00 | 16,800.00 | 200.00 | Unfavorable |
| Utilities | 9,500.00 | 9,600.00 | (100.00) | Favorable |
| Supervision | 60,000.00 | 60,000.00 | - | NA |
| Depreciation | 22,000.00 | 22,000.00 | - | NA |
| Property taxes | 18,000.00 | 18,000.00 | - | NA |
| Insurance | 13,000.00 | 13,000.00 | - | NA |
| Total Expense | 181,700.00 | 180,200.00 | 1,500.00 | Unfavorable |
| Did the supervisor do a good, average or poor job in controlling expenses? Explain your rationale. |
| It was average job. Because total cost has increased by $ 1,500. |
| Rationale is fixed costs are same as before so only control lack was in variable costs. |
| Would you recommend that the Assembly Department uses a static budget instead? Why or why not? |
| No static budget is not recommended. Because static budget is made for a fixed activity and is not suitable for different level of activities. |
| What type of responsibility center do you believe that the Assembly Department is? Explain your rationale. |
| Assembly Department is cost center. |
| Rationale: Because revenue data is not given only cost data is given. |
ekkarill92 answered 1 year agoRelated Solutions
Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Morningside Technologies Inc. uses flexible An accounting device
used to plan and control resources of operational departments and
divisions.budgets that are based on the following data:
Sales commissions
6% of sales
Advertising expense
25% of sales
Miscellaneous administrative expense
$1,350 per month plus 1% of sales
Office salaries expense
$13,000 per month
Customer support expenses
$1,900 plus 2% of sales
Research and development expense
2,550 per month
Prepare a...
Flexible Budget for Selling and Administrative Expenses for a Service Company Cloud Productivity Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Cloud Productivity Inc. uses flexible budgets that are based on
the following data:
Sales commissions
15% of sales
Advertising expense
18% of sales
Miscellaneous administrative expense
$9,000 per month plus 12% of sales
Office salaries expense
$28,000 per month
Customer support expenses
$12,000 per month plus 20% of sales
Research and development expense
$30,000 per month
Prepare a flexible selling and administrative expenses budget
for March for sales volumes...
Flexible Budget for Selling and Administrative Expenses for a Service Company Cloud Productivity Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Cloud Productivity Inc. uses flexible budgets that are based on
the following data:
Sales commissions
15% of sales
Advertising expense
18% of sales
Miscellaneous administrative expense
$8,000 per month plus 12% of sales
Office salaries expense
$29,000 per month
Customer support expenses
$13,000 per month plus 20% of sales
Research and development expense
$30,000 per month
Prepare a flexible selling and administrative expenses budget
for March for sales volumes...
Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Morningside Technologies Inc. uses flexible budgets that are
based on the following data:
Sales commissions
5% of sales
Advertising expense
19% of sales
Miscellaneous administrative expense
$1,850 per month plus 3% of sales
Office salaries expense
$17,000 per month
Customer support expenses
$2,600 plus 4% of sales
Research and development expense
5,750 per month
Prepare a flexible selling and administrative expenses budget
for April for sales volumes of $115,000,...
Flexible Budget for Selling and Administrative Expenses for a Service Company Cloud Productivity Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Cloud Productivity Inc. uses flexible budgets that are based on
the following data:
Sales commissions
15% of sales
Advertising expense
20% of sales
Miscellaneous administrative expense
$7,500 per month plus 12% of sales
Office salaries expense
$29,000 per month
Customer support expenses
$13,000 per month plus 20% of sales
Research and development expense
$31,000 per month
Prepare a flexible selling and administrative expenses budget
for March for sales volumes...
Flexible Budget for Selling and Administrative Expenses for a Service Company Digital Solutions Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Digital Solutions Inc. uses flexible budgets that are based on
the following data:
Sales commissions
14% of sales
Advertising expense
18% of sales
Miscellaneous administrative expense
$8,000 per month plus 12% of sales
Office salaries expense
$30,000 per month
Customer support expenses
$13,000 per month plus 20% of sales
Research and development expense
$31,000 per month
Prepare a flexible selling and administrative expenses budget
for October for sales volumes...
Flexible Budget for Selling and Administrative Expenses for a Service Company Cloud Productivity Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company Cloud Productivity Inc. uses flexible budgets that
are based on the following data: Sales commissions 14% of sales
Advertising expense 18% of sales Miscellaneous administrative
expense $8,000 per month plus 12% of sales Office salaries expense
$28,000 per month Customer support expenses $14,000 per month plus
20% of sales Research and development expense $30,000 per month
Prepare a flexible selling and administrative expenses budget for
March for sales volumes...
Flexible Budget for Selling and Administrative Expenses for a Service Company Morningside Technologies Inc. uses flexible...
Flexible Budget for Selling and Administrative Expenses for a
Service Company
Morningside Technologies Inc. uses flexible budgets that are
based on the following data:
Sales commissions
9% of sales
Advertising expense
17% of sales
Miscellaneous administrative expense
$1,750 per month plus 2% of sales
Office salaries expense
$17,000 per month
Customer support expenses
$2,500 plus 3% of sales
Research and development expense
4,400 per month
Prepare a flexible selling and administrative expenses budget
for April for sales volumes of $110,000,...
Flexible Budget for Selling and Administrative Expenses Cloud Productivity Inc. uses flexible budgets that are based...
Flexible Budget for Selling and Administrative Expenses
Cloud Productivity Inc. uses flexible budgets that are based on
the following data:
Sales commissions
14% of sales
Advertising expense
18% of sales
Miscellaneous administrative expense
$9,000 per month plus 12% of sales
Office salaries expense
$28,000 per month
Customer support expenses
$13,000 per month plus 20% of sales
Research and development expense
$31,000 per month
Prepare a flexible selling and administrative expenses budget
for March for sales volumes of $400,000, $500,000, and...
Halle Brothers Water Pump Company, Inc. uses a flexible budget for manufacturing overhead based on machine...
Halle Brothers Water Pump Company, Inc. uses a flexible budget
for manufacturing overhead based on machine hours. Variable
manufacturing overhead costs per machine hour are as follows:
Indirect labor$5.00
Indirect materials2.50
Maintenance.80
Utilities.30
Fixed overhead costs per month are:
Supervision$2,800
Insurance1,200
Property taxes700
Depreciation1,500
The company believes it will normally operate in a range of
2,000 to 5,000 machine hours per month.
Required
1. Prepare a flexible manufacturing overhead budget for the
expected range of activity, using increments of 1,000...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
- The Following Java expression: S/10 * 10 + 10 – S = C Show that this...
ADVERTISEMENT