Braemar Saddlery uses department budgets and performance reports in planning and
ID: 2387820 • Letter: B
Question
Braemar Saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. The following annual performance report for the custom saddle production department was presented to the president of the company:Budgeted Costs
for 5,000 Units Actual
Costs
Incurred Over
(Under)
Budget
Per Unit Total
Variable manufacturing costs:
Direct materials $ 30.00 $ 150,000 $ 171,000 $ 21,000
Direct labor 48.00 240,000 261,500 21,500
Indirect labor 15.00 75,000 95,500 20,500
Indirect materials, supplies, etc. 9.00 45,000 48,400 3,400
Total variable manufacturing costs $ 102.00 $ 510,000 $ 576,400 $ 66,400
Fixed manufacturing costs:
Lease rental $ 9.00 $ 45,000 $ 45,000 $ 0
Salaries of foremen 24.00 120,000 125,000 $ 5,000
Depreciation and other 15.00 75,000 78,600 3,600
Total fixed manufacturing costs $ 48.00 $ 240,000 $ 248,600 $ 8,600
Total manufacturing costs $ 150.00 $ 750,000 $ 825,000 $ 75,000
Although a production volume of 5,000 saddles was originally budgeted for the year, the actual volume of production achieved for the year was 6,000 saddles. Direct materials and direct labor are charged to production at actual cost. Factory overhead is applied to production at the predetermined rate of 150 percent of the actual direct labor cost.
After a quick glance at the performance report showing an unfavorable manufacturing cost variance of $75,000, the president said to the accountant: "Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs."
Instructions
a.
Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles. (Leave no cells blank - be certain to enter "0" wherever required. Amounts to be deducted should be indicated with a minus sign. Round your per unit answers to 1decimal place. Omit the "$" sign in your response.)
BRAEMAR SADDLERY
Performance Report for Custom Saddle Production Dept.
For the Year Ended December 31, 20__
Budgeted Costs
for 6,000 Units Actual
Costs
Incurred Over
(or Under)
Budget
Per Unit Total
Variable manufacturing costs:
$ $ $ $
Total variable manufacturing costs $ $ $ $
Fixed manufacturing costs:
$ $ $ $
Total fixed manufacturing costs $ $ $ $
Total manufacturing costs $ $ $ $
b.
What is the amount of over- or underapplied manufacturing overhead for the year?
Manufacturing overhead applied $
Underapplied manufacturing overhead $
Explanation / Answer
. Flexible budget:
Particulars
Budgeted costs for 6,000 units
Actual costs
Under (over)
Per unit $
Total $
Incurred $
Budget $
Variable manufacturing costs:
Direct material
30
180,000
171,000
9,000
Direct labor
48
288,000
261,500
26,500
Indirect labor
15
90,000
95,500
-5,500
Indirect material, supplies
9
54,000
48,400
5,600
Total variable manufacturing costs
102
612,000
576,400
35,600
Fixed manufacturing costs:
Lease rental
9
54,000
45,000
9,000
Salaries of foremen
24
144,000
125,000
19,000
Depreciation and other
15
90,000
78,600
11,400
Total fixed manufacturing costs
48
288,000
248,600
39,400
Total manufacturing costs
150
900,000
825,000
75,000
b.Braemar manufacturing company has a significant control over the variable manufacturing costs. The company could produce 6,000 units of products at an underapplied overhead of 75,000. company has enough control over its production costs.
c.The underapplied manufacturing overhead for the year = $75,000
Particulars
Budgeted costs for 6,000 units
Actual costs
Under (over)
Per unit $
Total $
Incurred $
Budget $
Variable manufacturing costs:
Direct material
30
180,000
171,000
9,000
Direct labor
48
288,000
261,500
26,500
Indirect labor
15
90,000
95,500
-5,500
Indirect material, supplies
9
54,000
48,400
5,600
Total variable manufacturing costs
102
612,000
576,400
35,600
Fixed manufacturing costs:
Lease rental
9
54,000
45,000
9,000
Salaries of foremen
24
144,000
125,000
19,000
Depreciation and other
15
90,000
78,600
11,400
Total fixed manufacturing costs
48
288,000
248,600
39,400
Total manufacturing costs
150
900,000
825,000
75,000
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