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    Flexible budget and variance

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    Jim's Landscaping is the business of maintaining and improving yards in surrounding areas. The company bases its overhead cost budgets on the following data:

    Variable overhead costs:
    Supplies $4 per yard
    Machine maintenance $2 per yard
    Chemicals $6 per yard

    Fixed overhead costs:
    Salaries and wages $2300 per month
    Machine maintenance $800 per month
    Utilities $400 per month
    Rent $1100 per month

    In June, the following actual costs were incurred for 83 yards:
    Supplies $320
    Machine maintenance $180
    Chemicals $500
    Salaries and wages $2500
    Depreciation $800
    Utilities $450
    Rent $1100

    Construct a flexible budget performance report using the data provided. Show computations.

    Banner Inc. bases its variable overhead performance report on the actual direct labor hours of the period. Data concerning the most recent year that ended on December 31 are as follows:
    Budgeted direct labor hours 12000
    Actual direct labor hours 13500
    Standard direct labor hours allowed 13000
    Cost formula (per direct labor hour):
    Indirect labor $0.85
    Supplies $0.30
    Electricity $0.15
    Actual costs incurred:
    Indirect labor $11600
    Supplies $4000
    Electricity $2050

    Management would like to compute both the spending and efficiency variances for variable overhead in the company's variable overhead performance report. Prepare a variable overhead performance report with both the variable overhead spending and efficiency variances. Show computations and details.

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    Solution Summary

    The solution explains how to prepare a flexible budget performance report and calculate spending and efficiency variances.

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