Question

B&L Landscapes, Inc.

Mini Practice Part 5

Bill Graham and Larry Miller incorporated B&L Landscapes, Inc. on July 1, 2014. The business consists of lawn care and sprinkler system installations. In addition, they also sell two types of fertilizer. During 2015, B&L Landscapes, Inc. acquired a 30% interest in Crestline Pipe. The president of Crestline wants to develop a management report to evaluate Manufacturing Overhead costs. Bill and Larry want to help and have volunteered your services to providesome managerial reporting for Crestline. Crestline Pipe distributes high-quality PVC pipe and has the following information for the month of March, 2015

Crestline Pipe

Manufacturing Overhead Budget (Static)

For the Month of March, 2015

Budgeted production in LF 117,500

Budgeted costs

Indirect materials ($0.30/DLH) 7,050

Indirect labor ($0.50/DLH) 11,750

Utilities ($0.40/DLH) 9,400

Maintenance ($0.25/DLH) 5,875

Salaries 42,000

Depreciation 16,800

Property taxes 2,500

Insurance 1,200

Janitorial 1,300

Total budgeted costs $97,875

Crestline Pipe

Manufacturing Overhead Costs (Actual)

For the Month of March, 2015

Actual production in LF 118,500

Actual costs

Indirect materials 7,100

Indirect labor 11,825

Utilities 10,700

Maintenance 5,900

Salaries 42,000

Depreciation 16,800

Property taxes 2,500

Insurance 1,200

Janitorial 1,300

Total budgeted costs $99,325

Crestline Pipe had the following static budget and overhead costs for March. Manufacturing overhead is budgeted based on direct labor hours (DLH). Direct labor is budgeted at 12 minutes per linear foot (LF).

Instructions:

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

a)115,500 LF

b) 116,500 LF

c) 117,500 LF

d) 118,500 LF

e) 119,500 LF

2. Prepare a flexible budget report showing the differences (favorable and unfavorable) in manufacturing overhead costs for the month of March. Include your analysis of what variances should be investigated further.

3. Prepare a responsibility report for the manufacturing overhead for March, assuming only variable costs are controllable. Provide a brief evaluation of how this information could be used to measure the manufacturing manager’s performance.

RECORDING TABLES:

B&L Landscapes Inc

Manufacturing Overhead Flexible Budget

for the Month of March, 2015

Production in LF	115500	116500	117500	118500	119500
Variable Costs
Indirect Materials
Indirect Labor
Utilities
Maintenance
TOTAL VARIABLE COSTS
Fixed Costs:
Salaries
Depreciation
Property Taxes
Insurance
Janitorial
TOTAL FIXED COSTS:
TOTAL BUDGET COSTS:

B&L LANDSCAPES INC.

Manufacturing Overhead Flexible Budget Report

for the Month of March, 2015

	Budget	Actual	Difference	Favorable/Unfavorable
Production in LF
Variable Costs:
Indirect Materials
Indirect Labor
Utilities
Maintenance
TOTAL VARIABLE COSTS:
Fixed Costs:
Salaries
Depreciation
Property Taxes
Insurance
Janitorial
TOTAL FIXED COSTS:
TOTAL BUDGETED COSTS:

B&L LANDSCAPES INC.

Responsibility Report Manufacturing Overhead

for the Month of March, 2015

Constrollable Cost	Budget	Actual	Difference	Favorable/Unfavorable
Indirect Materials
Indirect Labor
Utilities
Maintenance

Answer 1

1.

B&L LANDSCAPES, INC.
Manufacturing Overhead Flexible Budget
For the Month of March, 2015
Production in LF	115500	116500	117500	118500	119500
Variable costs
Indirect materials	6930	6990	7050	7110	7170
Indirect labor	11550	11650	11750	11850	11950
Utilities	9240	9320	9400	9480	9560
Maintenance	5775	5825	5875	5925	5975
Total variable costs	33495	33785	34075	34365	34655
Fixed costs
Salaries	42000	42000	42000	42000	42000
Depreciation	16800	16800	16800	16800	16800
Property taxes	2500	2500	2500	2500	2500
Insurance	1200	1200	1200	1200	1200
Janitorial	1300	1300	1300	1300	1300
Total fixed costs	63800	63800	63800	63800	63800
Total budgeted costs	97295	97585	97875	98165	98455

2.

B&L LANDSCAPES, INC.
Manufacturing Overhead Flexible Budget Report
For the Month of March, 2015
	Budget	Actual	Difference	Favorable/ Unfavorable
Production in LF	118500	118500	0
Variable costs
Indirect materials	7110	7100	10	Favorable
Indirect labor	11850	11825	25	Favorable
Utilities	9480	10700	1220	Unfavorable
Maintenance	5925	5900	25	Favorable
Total variable costs	34365	35525	1160	Unfavorable
Fixed costs
Salaries	42000	42000	0	None
Depreciation	16800	16800	0	None
Property taxes	2500	2500	0	None
Insurance	1200	1200	0	None
Janitorial	1300	1300	0	None
Total fixed costs	63800	63800	0	None
Total budgeted costs	98165	99325	1160	Unfavorable

The costs for which there is a significant favorable or unfavorable variance and which are controllable should be investigated further such as the utilities cost.

3.

B&L LANDSCAPES, INC.
Responsibility Report Manufacturing Overhead
For the Month of March, 2015
Controllable cost	Budget	Actual	Difference	Favorable/ Unfavorable
Indirect materials	7110	7100	10	Favorable
Indirect labor	11850	11825	25	Favorable
Utilities	9480	10700	1220	Unfavorable
Maintenance	5925	5900	25	Favorable
Total controllable costs	34365	35525	1160	Unfavorable

The controllable manufacturing overhead costs are those costs which can be controlled or influenced by the manufacturing manager. The responsibility report shows how well the manufacturing manager has been able to control these costs which are within his sphere of influence. From the responsibility report for the month of March it is seen that there is an unfavorable variance of $1160 which means that the actual costs have exceeded the budgeted costs and the manager has not been able to control the costs which is a negative indicator of his/her performance.