(SO 2,3) Prepare a flexible budget, budget report, and graph for manu facturing
ID: 2528813 • Letter: #
Question
(SO 2,3) Prepare a flexible budget, budget report, and graph for manu facturing overhead. P11-38A High Arctic Manufacturing Company produces one product, Kebo. Because of wide fluctuations in the demand for Kebo, the assembly department has significant variations in its monthly production levels The annual master manufacturing overhead budget is based on 300,000 direct labour hours. In July, 27,500 labour hours were worked. The master manufacturing overhead budget for the year and the actual overhead costs incurred in July are as follows: Overhead Costs Variable Master Budget (annual Actual in Jul Indirect labour Indirect materials Utilities Maintenance $330,000 180,000 150,000 90,000 $29,000 14,000 13,900 8,350 Fixed Supervision Depreciation Insurance and taxes 150,000 96,000 60,000 $1,056,000 12,500 8,000 5,000 $90,750 Total Instructions (a) Prepare a monthly flexible overhead budget for the year ending December 31, 2016, assuming monthly production (a) Total costs: 22,500 DLH, $81,750; DLH, $100,500 Actual $90,750 levels range from 22,500 to 30,000 direct labour hours. Use increments of 2,500 direct labour hours. (b) Prepare a budget performance report for the month of July 2016, comparing actual results with budgeted data, basedTotal costs: 30,000 on the flexible budget. (b) Budget $94,250; (c) Were costs controlled effectively? Explain (d) State the formula for calculating the total monthly budgeted costs for High Arctic Manufacturing Company (e) Prepare a flexible budget graph showing total budgeted costs at 25,000 and 27,500 direct labour hours. Use increments of 5,000 on the horizontal axis and increments of $10,000 on the vertical axis.Explanation / Answer
a.High Arctic Manufacturing Company
Monthly Flexible Overhead Budget
For the year ending December 31, 2016
b. Budget Performance Report
For the month ended July 2016
c. Yes, costs were efficiently controlled. The actual variable overheads were $ 3,500 less than that budgeted at a DLH level of 27,500 hours. There were no variance as far as fixed overhead costs were concerned.
d. If the number of DLH is q,
Total monthly budgeted overhead costs = $ 25,500 + 2.5 q.
Direct Labor Hours 22,500 25,000 27,500 30,000 Overhead Costs Variable Indirect Labor 24,750 27,500 30,250 33,000 Indirect Materials 13,500 15,000 16,500 18,000 Utilities 11,250 12,500 13,750 15,000 Maintenance 6,750 7,500 8,250 9,000 Total Variable Overhead Costs 56,250 62,500 68,750 75,000 Fixed Supervision 12,500 12,500 12,500 12,500 Depreciation 8,000 8,000 8,000 8,000 Insurance and Taxes 5,000 5,000 5,000 5,000 Total 81,750 88,000 94,250 100,500Related Questions
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