Gundy Company expects to produce 1,200,000 units of Product XX in 2014. Monthly

Question

Gundy Company expects to produce 1,200,000 units of Product XX in 2014. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. In March 2014, the company incurs the following costs in producing 100,000 units: direct materials $525,000, direct labor $596,000, and variable overhead $805,000. Actual fixed costs were equal to budgeted fixed costs. Prepare a flexible budget report for March.

Explanation / Answer

Variable cost direct material                       5 direct labor                       6 overhead                       8 Fixed cost Depreciation                       2 Supervision                       1 Actual units produced in march          100,000 Actual costs Budgeted cost Variance variable direct material          525,000                     500,000      25,000 Unfavourable direct labor          596,000                     600,000 -      4,000 Favourable overhead          805,000                     800,000         5,000 Unfavourable Fixed cost Depreciation          200,000                     200,000                -   Supervision          100,000                     100,000                -

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