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7-17 Flexible budget. Connor Company's budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attaché case are $40, $8, $12, respectively. The president is pleased with the following performance report.
Actual Costs Static Budget Variance
Direct materials $364,000 $400,000 $36,000F
Direct manufacturing labor 78,000 80,000 2,000 F
Direct marketing (distribution)labor 110,000 120,000 10,000 F
Actual output was 8,800 attaché cases. Assume all three direct-cost items above are variable costs.
Is the president's pleasure justified? Prepare revised performance report that uses flexible budget and a static budget.
The expert examines flexible budgets for Connor Company.