Gundy Company expects to produce 1,226,400 units of Product XX in 2017. Monthly

Question

Gundy Company expects to produce 1,226,400 units of Product XX in 2017. Monthly production is expected to range from 70,600 to 104,200 units. Budgeted variable manufacturing costs per unit are: direct materials $3, direct labor $7, and overhead $11. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision are $3. In March 2017, the company incurs the following costs in producing 87,400 units: direct materials $288,200, direct labor $602,800, and variable overhead $964,400. Actual fixed costs were equal to budgeted fixed costs. Prepare a flexible budget report for March.

Explanation / Answer

Gundy Company

Flexible budget report

For the month of March , 2017

Dfference

Favorable (F) / Unfavorable (U)

Note : When actual cost is less than the budgeted cost than the difference is favorable , otherwise difference is unfavorable.

Particular Budgete Actual

Dfference

Favorable (F) / Unfavorable (U)

Activity Level 87,400 units 87,400 units Variable costs Direct materials $262,200 $288,200 $26,000 (U) direct labor $611,800 $602,800 $9,000 (F) Variable overhead $961,400 $964,400 $3,000 (U) Total variable costs $1,835,400 $1,855,400 $20,000 (U) Fixed costs Depreciation [ ( 1,226,400 units * $4) / 12] $408,800 $408,800 Nil Supervision [ ( 1,226,400 units * $3) / 12] $306,600 $306,600 Nil Total fixed costs $715,400 $715,400 Nil Total Costs $2,550,800 $2,570,800 $20,000 (U)

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