(SO 1, 2, 3) State the total budgeted cost formula, and prepare flexible budget
ID: 2553286 • Letter: #
Question
(SO 1, 2, 3) State the total budgeted cost formula, and prepare flexible budget reports for two time periods. P11-40A Laesecke Company uses budgets to control costs. The May 2016 budget report for the company's packaging department is as follows: LAESECKE COMPANY Budget Report Month Ended May 31, 2016 Manufacturing Costs Variable costs Difference: Favourable (F) Unfavourable (U) BudgetActual Direct materials Direct labour Indirect materials Indirect labour Utilities Maintenance 37,500 45,000 15,000 12,500 10,000 38,000 47,000 15,200 13,000 9,600 500 U 2,000 U 200 U 500 U 400 200 U Total variable costs -125.000 128,000 3,000 Fixed costs Rent Supervision Depreciation 10,000 7,000 5,000 22,000 $147,000 10,000 7,000 5,000 Total fixed costs Total costs $150,000 $3,000 U The monthly budget amounts in the report were based on an expected production of 50,000 units per month or 600,000 units per year. The company president was unhappy with the department managers performance. The department man- ager could not understand the unfavourable results. In May, 55,000 units were produced. Instructions (a) State the total budgeted cost formula. (b) Prepare a budget report for May, using flexible budget data. Why does this report provide a better basis for evaluating (b) Budget $159,500 (c) Budget $122.000 Actual $124,400 performance than the report based on static budget data? cost was 20% less in June than its actual cost in May, and (2) fixed costs were the same in the month of June as in May. (c) In June, 40,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variableExplanation / Answer
(a) Total budgeted cost formula = $22000 + $2.50 X
Variable cost per unit = $125000/50000 = $2.50
(b)
The flexible budget report provides a better basis for evaluating performance than the report based on the static budget because it compares costs at the same level of activity.
(c)
LAESECKE COMPANY Budget Report Packaging Department Month Ended May 31, 2016 Manufacturing costs Flexible Budget Actual Difference: Favorable (F)/Unfavorable (U) Variable costs Direct materials 41250 38000 3250 F Direct labor 49500 47000 2500 F Indirect materials 16500 15200 1300 F Indirect labor 13750 13000 750 F Utilities 11000 9600 1400 F Maintenance 5500 5200 300 F Total variable costs 137500 128000 9500 F Fixed costs Rent 10000 10000 0 Supervision 7000 7000 0 Depreciation 5000 5000 0 Total fixed costs 22000 22000 0 Total costs 159500 150000 9500 FRelated Questions
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