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:

  1. Prepare a flexible budget for the Assembly Department for the month of August.
  2. Identify the difference between budgeted and actual costs as favorable or unfavorable.
  3. Did the supervisor do a good, average or poor job in controlling expenses? Explain your rationale.
  4. Would you recommend that the Assembly Department uses a static budget instead? Why or why not?
  5. 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 ago
Next > < Previous

Related 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 materials​2.50 ​Maintenance​.80 ​Utilities​.30 Fixed overhead costs per month are: ​Supervision​$2,800 ​Insurance​1,200 ​Property taxes​700 ​Depreciation​1,500 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
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT