Question

Do It! Review 10-1

Wade Company estimates that it will produce 6,000 units of product IOA during the current month. Budgeted variable manufacturing costs per unit are direct materials $8, direct labor $13, and overhead $19. Monthly budgeted fixed manufacturing overhead costs are $7,700 for depreciation and $3,600 for supervision.

In the current month, Wade actually produced 6,500 units and incurred the following costs: direct materials $44,784, direct labor $76,700, variable overhead $122,550, depreciation $7,700, and supervision $3,852.

Prepare a static budget report. Hint: The Budget column is based on estimated production while the Actual column is the actual cost incurred during the period. (List variable costs before fixed costs.)

Wade Company Static Budget Report
						Difference
		Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUnits ProducedVariable Costs
DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUnits ProducedVariable Costs
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs		$		$		$	FavorableUnfavorableNeither Favorable nor Unfavorable
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUnits ProducedVariable Costs
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
Depreciation    Direct Labor    Direct Materials    Fixed Costs    Overhead    Supervision    Total Costs    Total Fixed Costs    Total Variable Costs    Units Produced    Variable Costs							FavorableUnfavorableNeither Favorable nor Unfavorable
DepreciationDirect LaborDirect MaterialsFixed CostsOverheadSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsUnits ProducedVariable Costs		$		$		$	FavorableUnfavorableNeither Favorable nor Unfavorable

Were costs controlled?

YesNo

Answer 1

	Budget	Actual	Variance
Produced units	6,000	6,500	500 F
Variable expense
Direct material	48,000	44,784	3,216 F
Direct labor	78,000	76,700	1,300 F
Variable overhead	114,000	122,550	8,550 U
Total variable expenses	240,000	244,034	4,034 U
Fixed expenses:
Depreciation	7,700	7,700	0
Supervision	3,600	3,852	252 U
Total fixed expenses	11,300	11,552	252 U
Total manufacturing cost	251,300	255,586	4,286 U

As the net result is negative, costs were not controlled