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E15.2 Rocky Mountain Manufacturing: Flexible Budgeting

Exercise 15.2 Flexible budgeting

Rocky Mountain Manufacturing produces a single product.
The original budget for November was based on expected production of 35,000 units; actual production for November was 33,250 units. The original budget and actual costs incurred for the manufacturing department follow:

Original Budget Actual Costs

Direct materials . . . . . . . . . . . . . . . . $ 551,250 .......$ 541,500
Direct labor . . . . . . . . . . . . . . . . . . . 427,000............ 413,500
Variable overhead . . . . . . . . . . . . . . 217,000............ 195,250
Fixed overhead . . . . . . . . . . . . . . . . 170,000 .....................172,500
Total. . . . . . . . . . . . . . . . . . . . . . . $1,365,250 .......$1,322,750

Required:
Prepare an appropriate performance report for the manufacturing department.

Solution Summary

This report is in excel, attached. Click in cells to see computations. Basically the budget is updated for the actual production level (for variable costs only) and then compared to actual.

$2.19