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    Flexible Budgets: Performance Report budget to actual

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    Company A produces fans. Company A plans to manufacture 72,000 evenly over the next quarter at the following costs:

    direct materials 1,440,000
    direct labor 360,000
    variable mfg costs 450,000 and
    fixed overhead 900,000.
    The last amount includes 72,000 of straight-line depreciation and 108,000 of supervisor salaries.

    Shortly after the quarters first month Company A reported:
    Direct materials 432,500
    dierct labor 110,600
    variable mfg costs 152,000
    depreciation 24,000
    supervisory salary 37,800
    other fixed mfg overhead 239,000
    total 995,900

    The work crew produced 20,000 fans in the first month

    Required:
    1. The crew supervisor needs to prepare a performance report that compares budgeted and actual cost for the period just ended (will produce a favorable result)

    2. 1. The CFO needs to prepare a performance report that compares budgeted and actual cost for the period just ended (will produce an unfavorable result).

    The CFO and the supervisor used different performance report calculations and ended with differing results.

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    https://brainmass.com/business/budgets/flexible-budgets-performance-report-budget-to-actual-34254

    Solution Preview

    The budgeted costs given are for the quarter and so to get the monthly budgeted costs we have to divide the costs by 3. We get:
    Actual costs Budgeted Costs
    Direct materials 432,500 480,000
    dierct labor 110,600 120,000
    variable mfg costs 152,000 150,000
    depreciation 24,000 ...

    Solution Summary

    The solution explains why the budgets prepared by the crew supervisor differ from those prepared by the CFO.

    $2.19