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    Flexible Budgets

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    Please see attached problem.

    Item Cost Formula
    Utilities... $6,000 per year, plus $0.30 per machine hour (MH)
    Supplies... $10,000 per year, plus $0.80 per machine hour
    Depreciation... $25,000 per year
    Indirect labor... $21,000 per year, plus $0.40 per machine hour

    Using these cost formulas, complete the following flexible budget:

    Machine Hours Cost Formula
    Overhead Costs (per MH) 8,000 10,000 12,000
    Variable overhead costs:
    Utilities 0.30 2,400 3,000 3,600
    Supplies 0.80 6,400 8,000 9,600
    Indirect labor 0.40 3,200 4,000 4,800
    Total variable costs.... $1.50 $12,000 $15,000 $18,000

    Fixed overhead costs:
    Utilities 6,000 6,000 6,000
    Supplies 10,000 10,000 10,000
    Depreciation 25,000 25,000 25,000
    Indirect labor 21,000 21,000 21,000
    Total fixed overhead costs.... 62,000 62,000 62,000
    Total overhead costs... $74,000 $77,000 $80,000

    Refer to the flexible budget data above. The standard time to complete one unit of product is 1.6 machine hours. Last year the company planned to operate at the 10,000 machine hour level of activity. During the year the following actual activity took place:

    Number of units produced.... 5,000 units
    Actual machine hours worked... 8,500 hours

    Actual overhead costs:
    Variable Fixed
    Utilities... $2,600 $5,900
    Supplies... $6,700 $10,300
    Indirect labor... $3,300 $21,700
    Depreciation... $25,000

    Prepare a performance report for the year using the format that appears below. Do not compute efficiency variances for variable overhead items.

    Performance Report Hardball Corp.
    Budgeted machine hours.... ________________
    Actual machine hours... ________________
    Standard machine hours... ________________

    Cost Formula Actual Cost Flex budget Spending or (per MH) 8,500 MHS based on Budgeted
    8,500 MHs Variance
    Variable overhead costs:
    ____________________ $________ $________ $________ $________
    ____________________ _________ _________ _________ _________
    ____________________ _________ _________ _________ _________
    Total variable costs.... $________ _________ _________ _________

    Fixed overhead costs:
    ____________________ _________ _________ _________
    ____________________ _________ _________ _________
    ____________________ _________ _________ _________
    ____________________ _________ _________ _________
    Total fixed costs.... _________ _________ _________
    Total overhead costs... $________ $________ $________

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