E10-3 Prepare flexible manufacturing overhead budget
Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours.
Variable manufacturing overhead costs per direct labor hour are as follows.
$1.00
0.70
0.40
Fixed overhead costs per month are supervision $4,000, depreciation, $1,200, and property taxes $800.
The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.
Instructions
Prepare a monthly manufacturing overhead flexible budget for 2017 for the expected range of activity,
using increments of 1,000 direct labor hours.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Indirect labor ($1.00) ? ? ? ?
Indirect materials ($0.70) ? ? ? ?
Utilities ($0.40) ? ? ? ?
Total variable cost ($2.10) ? ? ? ?
Fixed costs
Supervision Value Value Value Value
Depreciation Value Value Value Value
Property taxes Value Value Value Value
Total fixed costs ? ? ? ?
Total costs ? ? ? ?
After you have completed E10-3 consider the following additional question.
1. Assume that the variable manufacturing overhead costs for indirect labor and indirect materials
changed to $1.25 and $0.80 respectively. Revise the monthly manufacturing overhead flexible budget,
using increments of 1,000 direct labor hours.
For the Year 2017
Indirect labor
Indirect materials
Utilities
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
E10-3 Prepare flexible manufacturing overhead budget
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Indirect labor ($1.00) $7,000 $8,000 $9,000 $10,000
Indirect materials ($0.70) 4,900 5,600 6,300 7,000
Fixed costs
Supervision 4,000 4,000 4,000 4,000
Depreciation 1,200 1,200 1,200 1,200
MYERS COMPANY
Monthly Manufacturing Overhead Flexible Budget
For the Year 2017
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that the variable manufacturing overhead costs for indirect labor and indirect materials
changed to $1.25 and $0.80 respectively. Revise the monthly manufacturing overhead flexible budget,
using increments of 1,000 direct labor hours.
Activity level
Direct labor hours 7,000 8,000 9,000 10,000
Variable costs
Fixed costs
Supervision 4,000 4,000 4,000 4,000
Depreciation 1,200 1,200 1,200 1,200
E10-3 Prepare flexible manufacturing overhead budget
Meyers Company uses a flexible budget for manufacturing overhead based on direct labor hours.
Variable manufacturing overhead costs per direct labor hour are as follows.
Indirect labor $1.00
Indirect materials 0.70
Utilities 0.40
Fixed overhead costs per month are supervision $4,000, depreciation, $1,200, and property taxes $800.
The company believes it will normally operate in a range of 7,000 – 10,000 direct labor hours per month.
Using the information above, assume that in July 2017, Meyers Company incurs the following manufacturing
overhead costs.
Indirect labor 8,800$ Supervision 4,000$
Indirect materials 5,800 Depreciation 1,200
Utilities 3,200 Property taxes 800
Instructions
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
(c ) Comment on your findings.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
Direct labor hours (DLH) 9,000 DLH 9,000 DLH Unfavorable U
Variable costs
Indirect labor ($1.00) ? Value ?
Indirect materials ($0.70) ? Value ?
Utilities ($0.40) ? Value ?
Total variable costs ($2.10) ? ? ?
Fixed costs
Supervision Value Value Value
Depreciation Value Value Value
Property taxes Value Value Value
Total fixed costs ? ? ?
Total costs ? ? ?
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
Direct labor hours (DLH) 8,500 DLH 8,500 DLH Unfavorable U
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Variable Costs
Fixed Costs
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
Variable costs
Indirect labor ($1.00) ? ? ?
Indirect materials ($0.70) ? ? ?
Utilities ($0.40) ? ? ?
Total variable costs ($2.10) ? ? ?
3
Supervision Value Value Value
Depreciation Value Value Value
Property taxes Value Value Value
Total fixed costs ? ? ?
Total costs ? ? ?
(c ) Comment on your findings.
After you have completed E10-4 consider the following additional question.
1. Assume that actual direct labor hours was 8,750 for the month of July 31, 2017. Actual costs
incurred for Indirect labor and indirect materials were $8,500 and $5,500. Revise the manufacturing
overhead flexible budget report for July.
Response:
E10-3 Prepare flexible manufacturing overhead budget
(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
9,000 DLH 9,000 DLH Unfavorable U
Direct labor hours (DLH)
Variable costs
Indirect labor ($1.00) 9,000$ 8,800$ $200 F
Indirect materials ($0.70) 6,300 5,800 500 F
(b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours
during the month.
Difference
Budget at Actual Costs Favorable F
8,500 DLH 8,500 DLH Unfavorable U
Direct labor hours (DLH)
Variable costs
Indirect labor ($1.00) 8,500$ 8,800$ (300)$ U
Indirect materials ($0.70) 5,950 5,800 150 F
Utilities ($0.40) 3,400 3,200 200 F
Total variable costs ($2.10) 17,850 17,800 50 F
(c ) Comment on your findings.
For the Month Ended July 31, 2017
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
In case (a) the performance for the month was satisfactory. In case (b)
management may need to determine the cause of the unfavorable difference for
indirect labor, or since the difference is small, 3.5% of budgeted cost for indirect
labor, it might be considered immaterial.
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that actual direct labor hours was 8,750 for the month of July 31, 2017. Actual costs
incurred for Indirect labor and indirect materials were $8,500 and $5,500. Revise the manufacturing
overhead flexible budget report for July.
(a) Prepare a flexible budget performance report, assuming that the company worked 8,750 direct labor
hours during the month.
Difference
Budget at Actual Costs Favorable F
Fixed costs
Supervision 4,000 4,000 0
Depreciation 1,200 1,200 0
MEYERS COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended July 31, 2017
E10-3 Prepare flexible manufacturing overhead budget
Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from
$170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising
4%, traveling 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,000, depreciation on delivery
equipment $7,000, and insurance on delivery equipment $1,000.
Instructions
Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range for
the year ending December 31, 2017.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Sales commissions (6%) ? ? ? ?
Advertising (4%) ? ? ? ?
Traveling (3%) ? ? ? ?
Delivery (2%) ? ? ? ?
Total variable expenses (15%)
? ? ? ?
Fixed expenses
Sales salaries Value Value Value Value
Depreciation Value Value Value Value
Insurance Value Value Value Value
Total fixed expenses ? ? ? ?
Total expenses Value Value Value Value
After you have completed E10-5 consider the following additional question.
1. Assume that variable costs and their percentage relationship to sales are sales commissions 7%,
advertising 3.5%, traveling 4%, and delivery 1%. Revise the monthly flexible budget for each $10,000
increment of sales for the year ending December 31, 2017.
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
E10-3 Prepare flexible manufacturing overhead budget
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Sales commissions (6%) 10,200$ 10,800$ 11,400$ 12,000$
Advertising (4%) 6,800 7,200 7,600 8,000
Fixed expenses
Sales salaries 35,000 35,000 35,000 35,000
Depreciation 7,000 7,000 7,000 7,000
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that variable costs and their percentage relationship to sales are sales commissions 7%,
advertising 3.5%, traveling 4%, and delivery 1%. Revise the monthly flexible budget for each $10,000
increment of sales for the year ending December 31, 2017.
Activity level
Sales Revenue $170,000 $180,000 $190,000 $200,000
Variable expenses
Fixed expenses
Sales salaries 35,000 35,000 35,000 35,000
Depreciation 7,000 7,000 7,000 7,000
FALLON COMPANY
Monthly Selling Expense Flexible Budget
For the Year 2017
E10-3 Prepare flexible manufacturing overhead budget
Bumblebee Company estimates that 300,000 direct labor hours will be worked during the coming year, 2017,
in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data, shown below,
are computed for the year.
Supervision $96,000 Indirect labor $126,000
Depreciation 72,000 Indirect materials 90,000
Insurance 30,000 Repairs 69,000
Rent 24,000 Utilities 72,000
Property taxes 18,000 Lubricants 18,000
$240,000 $375,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.
During October 27,000 direct labor hours were worked and the following overhead costs were incurred.
Fixed overhead costs: supervision $8,000, depreciation $6,000, insurance $2,460, rent $2,000,
and property taxes $1,500.
Variable overhead costs: indirect labor $12,432, indirect materials $7,680, repairs $6,100,
utilities $6,840, and lubricants $1,920.
Instructions
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
(b) Prepare a flexible budget report for October.
(c ) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
Activity level
Direct labor hours 27,000 30,000 33,000 36,000
Variable costs
Indirect labor ($0.42) ? ? ? ?
Indirect materials ($0.30) ? ? ? ?
Repairs ($0.23) ? ? ? ?
Utilities ($0.24) ? ? ? ?
Lubricants ($0.06) ? ? ? ?
Total variable costs ($1.25) ? ? ? ?
Fixed costs
Supervision ? ? ? ?
Depreciation ? ? ? ?
Insurance ? ? ? ?
Rent ? ? ? ?
Property taxes ? ? ? ?
Total fixed costs ? ? ? ?
Total costs ? ? ? ?
Fixed Overhead Costs
BUMBLEBEE COMPANY
Packaging Department
Monthly Manufacturing Overhead Flexible Budget
Variable Overhead Costs
For the Year 2017
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Direct labor hours 27,000 DLH 27,000 DLH
Unfavorable U
Variable costs
Indirect labor ($0.42) ? Value ?
Indirect materials ($0.30) ? Value ?
Repairs ($0.23) ? Value ?
Utilities ($0.24) ? Value ?
Lubricants ($0.06) ? Value ?
Total variable costs ($1.25) ? ? ?
Fixed costs
Supervision Value Value ?
Depreciation Value Value ?
Insurance Value Value ?
Rent Value Value ?
Property taxes Value Value ?
Total fixed costs ? ? ?
Total costs ? ? ?
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
After you have completed P10-1A consider the following additional question.
1. Assume that during October, the actual direct labor hours worked changed to 27,500 hours.
In addition, actual variable overhead costs incurred for indirect labor and indirect materials
also changed to $13,500 and $8,200 respectively. Revise the flexible budget report for
October.
BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
Response:
E10-3 Prepare flexible manufacturing overhead budget
(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor
hours over the relevant range for the year ending December 31, 2017.
Activity level
Direct labor hours 27,000 30,000 33,000 36,000
Variable costs
Indirect labor ($0.42)* 11,340$ 12,600$ 13,860$ 15,120$
Indirect materials ($0.30) 8,100 9,000 9,900 10,800
Repairs ($0.23)
6,210 6,900 7,590 8,280
Fixed costs
Supervision** 8,000 8,000 8,000 8,000
Depreciation 6,000 6,000 6,000 6,000
Insurance 2,500 2,500 2,500 2,500
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Direct labor hours 27,000 DLH 27,000 DLH Unfavorable U
Variable costs
Indirect labor ($0.42) $11,340 12,432$ ($1,092) U
Indirect materials ($0.30) 8,100 7,680 420 F
Repairs ($0.23)
6,210 6,100 110 F
Fixed costs
BUMBLEBEE COMPANY
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
For the Year 2017
Monthly Manufacturing Overhead Flexible Budget
Packaging Department
BUMBLEBEE COMPANY
Packaging Department
Insurance 2,500 2,460 40 F
Rent 2,000 2,000 0
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that during October, the actual direct labor hours worked changed to 27,500 hours.
In addition, actual variable overhead costs incurred for indirect labor and indirect materials
also changed to $13,500 and $8,200 respectively. Revise the flexible budget report for
October.
(b) Prepare a flexible budget report for October.
Difference
Budget at Actual Costs Favorable F
Variable costs
Indirect labor ($0.42) $11,550 13,500$ ($1,950) U
Indirect materials ($0.30) 8,250 8,200 50 F
Fixed costs
Supervision 8,000 8,000 0
Depreciation
6,000 6,000 0
Insurance 2,500 2,460 40 F
Rent 2,000 2,000 0
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
BUMBLEBEE COMPANY
Packaging Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended October 31, 2017
The overall performance of management was slightly unfavorable (3.9%). The largest
E10-3 Prepare flexible manufacturing overhead budget
Ratchet Company uses budgets in controlling costs. The August 2017 budget report for the company’s Assembling
Department is as follows.
Difference
Favorable F
Budget Actual Unfavorable U
Variable costs
Direct materials 48,000$ 47,000 $1,000 F
Direct labor 54,000 51,200 2,800 F
Indirect materials 24,000 24,200 200 U
Indirect labor 18,000 17,500 500 F
Utilities 15,000 14,900 100 F
Maintenance 12,000 12,400 400 U
Total variable 171,000 167,200 3,800 F
Fixed costs
Rent 12,000 12,000 0
Supervision 17,000 17,000 0
Depreciation 6,000 6,000 0
Total fixed 35,000 35,000 0
Total costs 206,000$ 202,200$ $3,800 F
The monthly budget amounts in the report were based on an expected production of 60,000 units per month
or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise,
or at least praise for a job well done. The company president, however, is unhappy with the results for August
because only 58,000 units were produced.
Instructions
(a) State the total monthly budgeted cost formula.
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better
basis for evaluating performance than the report based on static budget data?
(c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming
(1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in
September as in August.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) State the total monthly budgeted cost formula.
Fixed cost Value + variable cost of Value per unit
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better
basis for evaluating performance than the report based on static budget data?
Difference
Budget at
Actual Costs
Favorable F
Units 58,000 units 58,000 units Unfavorable U
Manufacturing Cost
Ratchet Company
Budget Report
Assembling Department
For the Month Ended August 31, 2017
RATCHET COMPANY
Assembling department
Flexible budget Report
For the Month Ended August 31, 2017
Variable costs
Direct materials ? Value ?
Direct labor ? Value ?
Indirect materials ? Value ?
Indirect labor ? Value ?
Utilities ? Value ?
Maintenance ? Value ?
Total variable ? ? ?
Fixed costs
Rent Value Value ?
Supervision Value Value ?
Depreciation Value Value ?
Total fixed ? ? ?
Total costs ? ? ?
(c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming
(1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in
September as in August.
Difference
Budget at
Actual Costs
Favorable F
Units 64,000 units 64,000 units Unfavorable U
Variable costs
Direct materials ? ? ?
Direct labor ? ? ?
Indirect materials ? ? ?
Indirect labor ? ? ?
Utilities ? ? ?
Maintenance ? ? ?
Total variable ? ? ?
Fixed costs
Rent Value Value Value
Supervision Value Value Value
Depreciation Value Value Value
Total fixed ? ? ?
Total costs ? ? ?
Assembling department
Flexible budget Report
For the Month Ended September 30, 2017
RATCHET COMPANY
Response:
Response:
After you have completed P10-3A consider the following additional question.
1. Assume that the number of units produced in September changed to 68,000. Revise
the flexible budget report for September assuming (1) each variable cost was 12%
higher than its actual cost in August and (s) fixed costs remain the same in September
as in August.
E10-3 Prepare flexible manufacturing overhead budget
(a) State the total monthly budgeted cost formula.
Fixed cost
$35,000 +
variable cost of
$2.85 per unit
Variable cost per unit = $171,000 ÷ 60,000 units = $2.85 per unit.
(b)
Prepare a budget report for August using flexible budget data. Why does this report provide a better
basis for evaluating performance than the report based on static budget data?
Difference
Budget at Actual Costs Favorable F
Units 58,000 units 58,000 units Unfavorable U
Variable costs*
Direct materials ($0.80 x 58,000) $46,400 $47,000 ($600) U
Direct labor ($.90 x 58,000) 52,200 51,200 1,000 F
Fixed costs
Rent 12,000 12,000 0
Supervision 17,000 17,000 0
Note: The per unit variable costs are computed by taking the budget amount at 60,000 units
and dividing it by 60,000. For example, direct materials per unit is $48,000 ÷ 60,000 units, or $0.80 per unit.
(c) In September 64,000 units were produced. Prepare the budget report using flexible budget data, assuming
(1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in
September as in August.
Difference
Budget at Actual Costs Favorable F
Units 64,000 units 64,000 units Unfavorable U
Variable costs
Direct materials ($0.80 x 64,000) $51,200 $51,700 ($500) U
Direct labor ($.90 x 64,000) 57,600 56,320 1,280 F
Assembling department
Flexible budget Report
For the Month Ended September 30, 2017
RATCHET COMPANY
RATCHET COMPANY
Assembling department
Flexible budget Report
For the Month Ended August 31, 2017
This report provides a better basis for evaluating performance because the budget is based
Indirect materials($.40 x 64,000) 25,600 26,620 (1,020) U
Indirect labor ($.30 x 64,000) 19,200 19,250 (50) U
Fixed costs
Rent 12,000 12,000 0
Supervision 17,000 17,000 0
Note that actual variable costs in September were 10% higher than the actual variable costs in August. Therefore,
to find the actual variable costs in September, the actual variable costs in August must be increased 10% as follows:
August
(actual)
September
(actual)
Direct materials $47,000 x 110% = $51,700
Direct labor 51,200 x 110% = 56,320
Indirect materials 24,200 x 110% = 26,620
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that the number of units produced in September changed to 68,000. Revise
the flexible budget report for September assuming (1) each variable cost was 12%
higher than its actual cost in August and (s) fixed costs remain the same in September
as in August.
Difference
Budget at Actual Costs Favorable F
Units 68,000 units 68,000 units Unfavorable U
Variable costs
Direct materials ($0.80 x 68,000) $54,400 $52,640 $1,760 F
Direct labor ($.90 x 68,000) 61,200 57,344 3,856 F
Indirect materials($.40 x 68,000) 27,200 27,104 96 F
Fixed costs
Rent 12,000 12,000 0
Supervision 17,000 17,000 0
Depreciation 6,000 6,000 0
August (actual)
September
(actual)
Direct materials $47,000 x 112% =$52,640
Direct labor 51,200 x 112% =57,344
RATCHET COMPANY
Assembling department
Flexible budget Report
For the Month Ended September 30, 2017
The manager’s performance was much better in September than it was in August. Each
E10-3 Prepare flexible manufacturing overhead budget
The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an
estimated annual production of 4,000 kayaks during 2017. Each kayak will require 54 pounds of polyethylene powder
and a finishing kit (rope, seat, hardware, etc.). The polyethylene powder used in these kayaks costs $1.50 per pound,
and the finishing kit cost $170 each. Each kayak will use two kinds of labor – 2 hours of type I labor from people who
run the oven and trim the plastic, and 3 hours of work from type II workers who attach the hatches and seat and other
hardware. The type I employees are paid $15 per hour, and the type II are paid $12 per hour.
Manufacturing overhead is budgeted at $396,000 for 2017, broken down as follows.
Variable costs
Indirect materials $40,000
Manufacturing supplies 53,800
Maintenance and utilities 88,000
181,800
Fixed costs
Supervision 90,000
Insurance 14,400
Depreciation 109,800
214,200
Total $396,000
During the first quarter, ended March 31, 2017, 1,050 units were actually produced with the
following costs.
Polyethylene powder $87,000
Finishing kits 178,840
Type I labor 31,500
Type II labor 39,060
Indirect materials 10,500
Manufacturing supplies 14,150
Maintenance and utilities 26,000
Supervision 20,000
Insurance 3,600
Depreciation 27,450
Total $438,100
Instructions
(a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced.
(b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume
activity levels of 900, 1,000 and 1,050 units.
(c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for
manufacturing for the quarter ended March 31, 2017, when 1,050 units were produced.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced.
4,000 Kayaks
Amount
Budgeted
Costs:
Variable cost
Polyethylene powder ?
Finishing kits ?
Value
Value
Current Designs
Manufacturing Budget
Rotomolded Line
For the Year Ended December 31, 2017
Units to be produced
Calculations
Labor – Type I ?
Labor – Type II ?
Indirect materials Value
Manufacturing supplies Value
Maintenance and utilities
Value
Total variable costs ?
Fixed costs
Supervision Value
Insurance Value
Depreciation Value
Total fixed costs ?
Total costs ?
(b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume
activity levels of 900, 1,000 and 1,050 units.
Units to be produced 900 kayaks 1,000 kayaks 1,050 kayaks
Costs:
Variable costs
Polyethylene powder ? ? ?
Finishing kits ? ? ?
Labor -Type I ? ? ?
Labor – Type II ? ? ?
Indirect materials ? ? ?
Manufacturing supplies ? ? ?
Maintenance & utilities ? ? ?
Total variable costs ? ? ?
Fixed costs
Supervision (a) ? ? ?
Insurance (b) ? ? ?
Depreciation ©
? ? ?
Total fixed costs ? ? ?
Total costs ? ? ?
(c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for
manufacturing for the quarter ended March 31, 2017, when 1,050 units were produced.
Manufacturing Flexible Budget Report
For the Quarter Ended March 31, 2017
Current Designs
Rotomolded Line
Manufacturing Flexible Budget Report
For the Quarter Ended March 31, 2017
Current Designs
Rotomolded Line
Value
Value
Difference
Budget Actual costs F = favorable
Production in units
1,050 kayaks
1,050 kayaks U = unfavorable
Costs:
Variable costs
Polyethylene powder ? ? ?
Finishing kits ? ? ?
Labor -Type I ? ? ?
Labor -Type II ? ? ?
Indirect materials ? ? ?
Manufacturing supplies ? ? ?
Maintenance & utilities ? ? ?
Total variable costs ? ? ?
Fixed costs
Supervision ? ? ?
Insurance ? ? ?
Depreciation ? ? ?
Total fixed costs ? ? ?
Total costs ? ? ?
After you have completed CD10 consider the following additional questions.
1. Assume that the activity levels in the flexible budget for the quarter ended March 31, 2017
changed to 900, 1,000 and 1,200 in part (b). Show the impact of this change on the flexible budget.
2. Assuming the rotomolded line is treated as a profit center, revise the flexible budget report for
manufacturing for the quarter ended March 31, 2017, assuming 1,200 units were produced.
Assume that variable costs were 10% higher at this level of activity.
E10-3 Prepare flexible manufacturing overhead budget
(a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced.
4,000 Kayaks
Amount
Budgeted
Costs:
Variable cost
Polyethylene powder $324,000
Finishing kits $680,000
Labor – Type I $120,000
(b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume
activity levels of 900, 1,000 and 1,050 units.
Production in units 900 kayaks 1,000 kayaks 1,050 kayaks
Costs:
Variable costs
Polyethylene powder $72,900 $81,000 $85,050
(54 x $1.50 per unit)
Finishing kits 153,000 170,000 178,500
4,000 x 54 x $1.50
4,000 x $170
4,000 x 2 x $15
Current Designs
Rotomolded Line
Manufacturing Flexible Budget Report
For the Quarter Ended March 31, 2017
Current Designs
Rotomolded Line
Manufacturing Budget
For the Year Ended December 31, 2017
Units to be produced
Calculations
4,000 x 3 x $12
Manufacturing supplies 12,105 13,450 14,123
($13.45 per unit (b))
Maintenance & utilities 19,800 22,000 23,100
($22 per unit (c) )
Total variable costs 326,205 362,450 380,573
(a) $40,000 ÷ 4,000 = $10 per unit (d) $90,000 ÷ 4 quarter s= $22,500
(c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for
manufacturing for the quarter ended March 31, 2017, when 1,050 units were produced.
Difference
Units to be produced Budget Actual costs F = favorable
1,050 kayaks
1,050 kayaks U = unfavorable
Costs:
Variable costs
Polyethylene powder $85,050 $87,000 ($1,950) U
Finishing kits 178,500 178,840 (340) U
Labor -Type I 31,500 31,500 0
Labor -Type II 37,800 39,060 (1,260) U
For the Quarter Ended March 31, 2017
Current Designs
Rotomolded Line
Manufacturing Flexible Budget Report
E10-3 Prepare flexible manufacturing overhead budget
1. Assume that the activity levels in the flexible budget for the quarter ended March 31, 2017
changed to 900, 1,000 and 1,200 in part (b). Show the impact of this change on the flexible budget.
2. Assuming the rotomolded line is treated as a profit center, revise the flexible budget report for
manufacturing for the quarter ended March 31, 2017, assuming 1,200 units were produced.
Assume variable costs were 10% higher at this level of activity.
(a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced.
4,000 Kayaks
Amount
Budgeted
Costs:
Variable cost
Polyethylene powder $324,000
Finishing kits $680,000
Labor – Type I $120,000
Fixed costs
Supervision 90,000
Insurance 14,400
(b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume
activity levels of 900, 1,000 and 1,200 units.
Production in units 900 kayaks 1,000 kayaks 1,200 kayaks
Costs:
Variable costs
Polyethylene powder $72,900 $81,000 $97,200
(54 x $1.50 per unit)
Current Designs
Rotomolded Line
Manufacturing Budget
For the Year Ended December 31, 2017
Production in units
Calculations
4,000 x 54 x $1.50
4,000 x $170
4,000 x 2 x $15
Current Designs
Rotomolded Line
Manufacturing Flexible Budget Report
For the Quarter Ended March 31, 2017
4,000 x 3 x $12
(2 hrs./unit x $15/hr.)
Labor – Type II 32,400 36,000 43,200
(3 hrs./unit x $12/hr.)
Indirect materials 9,000 10,000 12,000
Fixed costs
Supervision (d) 22,500 22,500 22,500
Insurance (e) 3,600 3,600 3,600
Depreciation (f) 27,450 27,450 27,450
(c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for
Difference
Units to be produced Budget Actual costs F = favorable
1,200 kayaks
1,200 kayaks U = unfavorable
Costs:
Variable costs
Polyethylene powder $97,200 $95,700 $1,500 F
Finishing kits 204,000 196,724 7,276 F
Labor -Type I 36,000 34,650 1,350 F
Fixed costs
Supervision 22,500 20,000 2,500 F
Insurance 3,600 3,600 0
For the Quarter Ended March 31, 2017
Current Designs
Rotomolded Line
Manufacturing Flexible Budget Report