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# Revised performance report

See attached Excel file.

Budgeted Costs for 5,000 Units Actual Costs Over(under)
Per Unit Total Incurred Budget
Variable manufacturing costs:
Direct materials \$30.00 \$150,000.00 \$171,000.00 \$21,000.00
Diirect labor \$48.00 \$240,000.00 \$261,500.00 \$21,500.00
Indirect labor \$15.00 \$75,000.00 \$95,500.00 \$20,500.00
Indirect materials, supplies, etc. \$9.00 \$45,000.00 \$48,400.00 \$3,400.00
Total variable manufacturing costs \$102.00 \$510,000.00 \$576,400.00 \$66,400.00
Fixed manufacturing costs:
Lease rental \$9.00 \$45,000.00 \$45,000.00 \$-
Salaries of foremen \$24.00 \$120,000.00 \$125,000.00 \$5,000.00
Depreciation and other \$15.00 \$75,000.00 \$78,600.00 \$36,000.00
Total fixed manufacturing costs \$48.00 \$240,000.00 \$248,600.00 \$8,600.00
Total manufacturing costs \$150.00 \$750,000.00 \$825,000.00 \$75,000.00

Although a production volume of 5,000 saddles was originally budgeted for the year, the actual volume of production achieved for the year was 6,000 saddles. Direct materials and direct labor are charged to production at actual cost. Factory overhead is applied to production at the predetermined rate of 150 percent of the actual direct labor cost.
After a quick glance at the performance report showing an unfavorable manufacturing cost variance of \$75,000, the president said to the accountant: "Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs."

Instructions

a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles.
b. Briefly comment on Braemar's ability to control its variable manufacturing costs.
c. What is the amount of over- or underapplied manufacturing overhead for the year?

#### Solution Preview

Braemar saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations.
The following annual performance report for the custom saddle production department was present to the president of the company:

Budgeted Costs for 5,000 Units Actual Costs Over(under)
Per Unit Total Incurred Budget
Variable manufacturing costs:
Direct materials \$30.00 \$150,000.00 \$171,000.00 \$21,000.00
Diirect labor \$48.00 \$240,000.00 \$261,500.00 \$21,500.00
Indirect labor \$15.00 \$75,000.00 \$95,500.00 \$20,500.00
Indirect materials, supplies, etc. \$9.00 \$45,000.00 \$48,400.00 \$3,400.00
Total variable manufacturing costs \$102.00 \$510,000.00 \$576,400.00 \$66,400.00
Fixed manufacturing costs:
Lease rental \$9.00 \$45,000.00 \$45,000.00 \$-
Salaries of foremen \$24.00 \$120,000.00 \$125,000.00 \$5,000.00
Depreciation and ...

#### Solution Summary

The solution explains how to prepare a revised performance report using a flexible budget

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