Hill Company uses budgets in controlling costs. The August 2014 budget report fo

Question

Hill Company uses budgets in controlling costs. The August 2014 budget report for the company’s Assembling Department is as follows.

The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 58,000 units were produced.

The formula is fixed costs $33,560 plus variable costs of $3.16 per unit($189,600 ÷ 60,000 units).

Prepare a budget report for August using flexible budget data

Difference Favcrable (F) Unfavorable (U) Neither Favorable nor Unfavorable Manufacturing Costs Budget Actual Variable costs $53,400 $1,100F 3,230 F 110 U 450 F 190 F Direct materials Direct labor Indirect $52,300 57,600 54,370 29,400 29,510 materials Indirect labor 22,800 22,350 18,000 17,810 Maintenance 8,400 8870 Total variable 189,600_185,210 Utilities 10 4,390 F Fixed costs Rent Supervision Depreciation 11,010 11,010 16,000 16,000 5,550 6,550 33,560 33,560 0-N -0-N -0-N 0-N S4,390 F Total fixed 33.560 33560 Total costs $223,160 $218,770

Explanation / Answer

EXPLANATION:

As budget data for the capacity of 60,000 units, where as actual production is 58,000 only. hence it is not correct to compare actual data with budgeted data . So we have to use flexible budget Conccept for the capacity of 58,000. It is caluclated as follows

for direct material : 60,000...............53,400

                             58,000.............. ?

                          =(53,400/60,000)*58000

                          =51,620

like wise we can caluclate for all particulars as follows for 58,000 capacity from 60,000 using flexible budget.

FLEXIBLE BUDGET Budgets Budgets Actual Difference Units 60,000 58,000 58,000 Variable Costs Direct Materials $53,400 $51,620 $52,300 -$680 U Direct Labour $57,600 $55,680 $54,370 $1,310 F Indirect Materials $29,400 $28,420 $29,510 -$1,090 U Indirect Labour $22,800 $22,040 $22,350 -$310 U Utilities $18,000 $17,400 $17,810 -$410 U Maintenance $8,400 $8,120 $8,870 -$750 U    Total Variable $1,89,600 $1,83,280 $1,85,210 -$1,930 U Fixed cost Rent 11,010 11,010 11,010 $0 N Supervision 16,000 16,000 16,000 $0 N Depreciation 6,500 6,500 6,500 $0 N    Total Fixed 33,510 33,510 33,510 $0 N Total Cost 2,23,110 2,16,790 2,18,720 -$1,930 U

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.