Question

Flexible Budget for Varying Levels of Activity

Nashler Company has the following budgeted variable costs per unit produced:

Direct materials	$7.20
Direct labor	1.54
Variable overhead:
Supplies	0.23
Maintenance	0.19
Power	0.18

Budgeted fixed overhead costs per month include supervision of $98,000, depreciation of $76,000, and other overhead of $245,000.

In March, Nashler Company produced 160,000 units and had the following actual costs:

Direct materials	$1,148,000
Direct labor	252,900
Supplies	37,300
Maintenance	30,340
Power	28,730
Supervision	99,400
Depreciation	76,000
Other overhead	244,300

Required:

1. Prepare a performance report for Nashler Company comparing actual costs with the flexible budget for actual units produced. If there is no variance, enter "0" for the amount and select "NA" in the last column.

Nashler Company Performance Report
	Actual Cost	Flexible Budget Cost	Variance
Direct materials	$	$	$
Direct labor
Supplies
Maintenance
Power
Supervision
Depreciation
Other overhead
Total cost	$	$	$

2. What if Nashler Company’s actual direct materials cost were $1,152,000? How would that affect the variance for direct materials? If an amount is zero, enter "0".
The materials variance would be $.

The total cost variance would   by $.

Answer 1

[1]

Nashler Company
Performance Report
	Actual Cost	Flexible Budget Cost	Variance
Direct materials	$1,148,000	$1,152,000	$4,000	Favourable
Direct labor	$252,900	$246,400	$6,500	Unfavourable
Supplies	$37,300	$36,800	$500	Unfavourable
Maintenance	$30,340	$30,400	$60	Favourable
Power	$28,730	$28,800	$70	Favourable
Supervision	$99,400	$98,000	$1,400	Unfavourable
Depreciation	$76,000	$76,000	$0	NA
Other overhead	$244,300	$245,000	$700	Favourable
Total cost	$1,916,970	$1,913,400	$3,570	Unfavourable

[2]

Total Material Variance would be $ 0 [1152000 - 1152000]
Total Cost Variance would Increase by $ 4,000