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Flexible budget and variance

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.

Solution Summary

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