Question

In: Accounting

Acompany manufactures and sells a wide variety of products. Performance reports are prepared monthly for each...

Acompany manufactures and sells a wide variety of products. Performance reports are prepared monthly for each department.

The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:

Cost Formulas
Direct labor $16.30q
Indirect labor $4,200 + $1.80q
Utilities $5,500 + $0.70q
Supplies $1,600 + $0.20q
Equipment depreciation $18,700 + $2.70q
Factory rent $8,300
Property taxes $2,700
Factory administration $13,200 + $0.80q

The Production Department planned to work 4,300 labor-hours in March; however, it actually worked 4,100 labor-hours during the month. Its actual costs incurred in March are listed below:

Actual Cost Incurred in March
Direct labor $ 68,410
Indirect labor $ 11,120
Utilities $ 8,900
Supplies $ 2,670
Equipment depreciation $ 29,770
Factory rent $ 8,700
Property taxes $ 2,700
Factory administration $ 15,870

Required:

Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

Solutions

Expert Solution

Solution:

Flexible Budget Performance Report
For the month ended March 31
Particulars Actual Results Revenue and spending variances Flexible Budget Activity Variances Planning Budget
Labor Hours 4100 4100 4300
Direct labor $68,410.00 $1,580.00 U $66,830.00 $3,260.00 F $70,090.00
Indirect labor $11,120.00 $460.00 F $11,580.00 $360.00 F $11,940.00
Utilities $8,900.00 $530.00 U $8,370.00 $140.00 F $8,510.00
Supplies $2,670.00 $250.00 U $2,420.00 $40.00 F $2,460.00
Equipment Depreciation $29,770.00 $0.00 None $29,770.00 $540.00 F $30,310.00
Factory Rent $8,700.00 $400.00 U $8,300.00 $0.00 None $8,300.00
Property tax $2,700.00 $0.00 None $2,700.00 $0.00 None $2,700.00
Factory Administration $15,870.00 $610.00 F $16,480.00 $160.00 F $16,640.00
Total expense $1,48,140.00 $1,690.00 U $1,46,450.00 $4,500.00 F $1,50,950.00


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