An Internet gourmet foods company, “Yumminess”, will be including “Chocolate Att

Question

An Internet gourmet foods company, “Yumminess”, will be including “Chocolate Attack Brownies” (CAB) in their online catalog. CAB will be sold in square tins and captioned with personal greetings. Jordan negotiated a selling price to Yumminess at $10 per tin.

You, using your accounting knowledge, had previously budgeted a cost of $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. Operating expenses are projected to be $80,000 annually.

After looking over the costs for manufacturing overhead and operating expenses, you approximate that 85% of manufacturing overhead and 20% of operating expenses are variable costs.

Jordan wants you to calculate a flexible manufacturing overhead budget assuming an annual level of 230,000 units instead of 200,000.

Given an annual master budget of 200,000 units with actual production of 210,000 units, you have been tasked to formulate a flexible budget report. What will be total manufacturing overhead costs at the budget level?

Explanation / Answer

Particulars 200000 230000 210000 Units Units Units Direct material @$6 12,00,000 13,80,000 12,60,000 Direct labour @$1.5 3,00,000 3,45,000 3,15,000 Manufacturing Overhead Fixed 15,000 2,250 10,750 Variable 85,000 97,750 89,250 Operating Expenses Fixed 64,000 61,600 63,200 Variable 16,000 18,400 16,800 Total Manufacturing Cost 16,80,000 19,05,000 17,55,000

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