Question

The following information is available for DEF Company pertaining to its budgeted and actual activities for the period.

Item	Budgeted Activity (10,000 units)	Actual Activity (12,000 units)
Sale Price	$10.00 per unit	$9.75 per unit
Variable Costs (per unit)
Direct Materials	$2.00 per unit	$1.89 per unit
Direct Labor	$3.00 per unit	$3.05 per unit
Factory Supplies	$0.25 per unit	$0.25 per unit
Utilities	$0.35 per unit	$0.33 per unit
Selling Costs	$0.50 per unit	$0.45 per unit
Fixed Costs (for the period)
Depreciation	$2,500	$3,000
Administrative Expenses	$15,000	$13,000
Property Taxes	$1,000	$1,000

Factory Supplies, Utilities, and Depreciation are considered to be overhead items.

The standard for each unit for direct materials is to use 10 ounces at a cost of $0.20 per ounce. The actual production used 9 ounces at a cost of $0.21 per ounce.

The standard for each unit for direct labor is to use 0.20 hours at $15.00 per hour. The actual production used 0.20 hours at $15.25 per hour.

Prepare a flexible budget performance report to compare actual results to a flexible budget performance for 12,000 units.

Answer 1

Solution:

DEF Company
Flexible Budget Performance Report
Particulars	Actual results	Flexible Budget Variance		Flexible Budget
Unit Sales	12000			12000
Revenue	$117,000.00	$3,000.00	U	$120,000.00
Less: Variable Expenses:
Direct material	$22,680.00	$1,320.00	F	$24,000.00
Direct labor	$36,600.00	$600.00	U	$36,000.00
Factory Supplies	$3,000.00	$0.00	None	$3,000.00
Utilities	$3,960.00	$240.00	F	$4,200.00
Selling Cost	$5,400.00	$600.00	F	$6,000.00
Total variable expenses	$71,640.00	$1,560.00	F	$73,200.00
Contribution margin	$45,360.00	$1,440.00	U	$46,800.00
Less: Fixed expenses:
Depreciation	$3,000.00	$500.00	U	$2,500.00
Administrative Expenses	$13,000.00	$2,000.00	F	$15,000.00
Property taxes	$1,000.00	$0.00	None	$1,000.00
Total fixed expenses	$17,000.00	$1,500.00	F	$18,500.00
Operating Income	$28,360.00	$60.00	F	$28,300.00