Question

Jax's production costs - Direct Labor                $           5.00 per unit        &nbs

Jax's production costs -

Direct Labor                $           5.00 per unit              15 minutes of labor

Raw Materials             $         12.00 per unit              2 pounds of raw material

Variable Overhead $ 2.50 per unit                50% of direct labor cost

Fixed Overhead $ 100,000

1. Assume that the company is planning on producing 100,000 units of Jax next month. Prepare the production cost budget for this product.

2. The company produced only 98,000 units of ABC and incurred the following actual costs:

Direct labor

$    499,800

Raw Materials

$1,127,000

Overhead

$    350,000

Prepare a budget variance report using a flexible budget.

Business   Accounting   
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Answer #1

1. Assume that the company is planning on producing 100,000 units of Jax next month. Prepare the production cost budget for this product.

Production cost budget
Direct material (100000*12) 1200000
Direct labour (100000*5) 500000
variable overhead (100000*2.5) 250000
Fixed overhead 100000
Total production cost 2050000

Prepare a budget variance report using a flexible budget.

Flexible budget Flexible budget variance Actual
Direct material 98000*12 = 1176000 49000 F 1127000
Direct labour 98000*5 = 490000 9800 U 499800
Overhead (98000*2.5+100000) 345000 5000 U 350000
Total 2011000 34200 F 1976800
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