Question

Baird Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department’s static budget and actual results for 2019 follow:

	Static Budget					Actual Results
Production in units	36,000 kits					37,500 kits
Direct materials		$	259,200				$	308,200
Direct labor			223,200					225,200
Variable manufacturing overhead			54,000					59,150
Total variable costs			536,400					592,550
Fixed manufacturing overhead			206,000					201,200
Total manufacturing cost		$	742,400				$	793,750

Required

a. Convert the static budget into a flexible budget.

b. Calculate the variances.

Convert the static budget into a flexible budget. (Do not round intermediate calculations.)

	Flexible Budget Production in units 37,500 Kits Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs

Calculate the variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Variances Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs

Answer 1

Baird Medical Equipment company
Flexible budget for 37500 Kits
Particluars		Amount $
Direct Material (259200/36000*37500)		$270,000.00
Direct Labor (223200/36000*37500)		$232,500.00
Variable Manufacturing Overhead (54000/36000*59150)		$88,725.00
Total Variable costs		$591,225.00
Fixed Manufacturing Overhead		$206,000.00
Total Manufacturing Cost		$797,225.00

Baird Medical Equipment company
Variance Report
Particulars	Flexible budget	Actual Results	Variance	Remark
Direct Material	$270,000.00	$308,200.00	-$38,200.00	Unfavourable
Direct Labor	$232,500.00	$225,200.00	$7,300.00	Favourable
Variable Manufaturing Overhead	$88,725.00	$59,150.00	$29,575.00	Favourable
Total Variable costs	$591,225.00	$592,550.00	-$1,325.00	Unfavourable
Fixed Manufaturing Overhead	$206,000.00	$201,200.00	$4,800.00	Favourable
Total Manufaturing Cost	$797,225.00	$793,750.00	$3,475.00	favourable