The following overhead data are for a department in a large company: Actual Cost

Question

The following overhead data are for a department in a large company: Actual Costs Static Incurred Budget Activity Level - units                  250                  220 Variable Costs: Indirect Materials $8,745 $7,634 Power $2,065 $1,738 Fixed Costs: Supervision $1,560 $1,600 Rent $7,210 $7,300 Required: Prepare a Flexible Budget Performance Report that would be useful in assessing how well costs were controlled in this department. The following overhead data are for a department in a large company: Actual Costs Static Incurred Budget Activity Level - units                  250                  220 Variable Costs: Indirect Materials $8,745 $7,634 Power $2,065 $1,738 Fixed Costs: Supervision $1,560 $1,600 Rent $7,210 $7,300 Required: Prepare a Flexible Budget Performance Report that would be useful in assessing how well costs were controlled in this department.

Explanation / Answer

Actual Costs Static Flexible Variances Remarks Incurred Budget Budget Activity Level - units 250 220 250 Variable Costs: Indirect Materials 8,745 7,634 8675 -70 Unfavourable Calculated @ $ 34.70 per unit based on static budget. Power 2,065 1,738 1975 -90 Unfavourable Calculated @ $ 7.90 per unit based on static budget. Fixed Costs: Supervision 1,560 1,600 1600 40 Favourable Being Fixed cost, will remain unchanged irrespective of activity level Rent 7,210 7,300 7300 90 Favourable Being Fixed cost, will remain unchanged irrespective of activity level

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