Question

Performance Report Based on Budgeted and Actual Levels of Production

Bowling Company budgeted the following amounts:

Variable costs of production:
Direct materials	3 pounds @ $0.60 per pound
Direct labor	0.5 hr. @ $16.00 per hour
VOH	0.5 hr. @ $2.20
FOH:
Materials handling	$6,200
Depreciation	$2,600

At the end of the year, Bowling had the following actual costs for production of 3,800 units:

Direct materials	$6,800
Direct labor	30,500
VOH	4,200
FOH:
Materials handling	6,300
Depreciation	$2,600

Required:

1. Calculate the budgeted amounts for each cost category listed above for the 4,000 budgeted units.
$

2. Prepare a performance report using a budget based on expected production of 4,000 units. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number and if there is no entries enter "0" then select for "Not applicable".

Bowling Company
Performance Report
	Actual	Budgeted	Variance
Units produced				Unfavorable
Direct materials	$	$	$	Favorable
Direct labor				Favorable
Variable overhead				Favorable
Fixed overhead:
Materials handling				Unfavorable
Depreciation				Not applicable
Total	$	$	$	Favorable

3. Prepare a performance report using a budget based on the actual level of production of 3,800 units. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number and if there is no entries enter "0" then select for "Not applicable".

Bowling Company
Performance Report
	Actual	Budgeted	Variance
Units produced				Not applicable
Direct materials	$	$	$	Favorable
Direct labor				Unfavorable
Variable overhead				Unfavorable
Fixed overhead:
Materials handling				Unfavorable
Depreciation				Not applicable
Total	$	$	$	Unfavorable

Answer 1

1. Cost for 4000 budgeted units Units 4000 7,200 32,000 4,400 Direct Material Direct Labor Variable Overhead Fixed Overhead: Material Handling Depreciation Total 6,200 2,600 52,400 2. Performance Report Budgeted 3800 6,800 $ 30,500 $ 4,200 $ Variance 4000 7,200 $ 32,000 $ 4,400 $ 200 Unfavorable (400) Favorable (1,500) Favorable (200) Favorable Units Produced Direct Material Direct Labor Variable Overhead Fixed Overhead: Material Handling Depreciation Total 6,300 2,600 50,400 $ $ $ 6,200 $ 2,600 $ 52,400 $ 100 Unfavorable Not applicable (2,000) Favorable 3. Performance Report Budgeted 3800 6,800 $ 30,500 $ 4,200 $ Variance 3800 6,840 $ 30,400$ 4,180 $ O Not applicable (40) Favorable 100 Unfavorable 20 Unfavorable Units Produced Direct Material Direct Labor Variable Overhead Fixed Overhead: Material Handling Depreciation Total $ 6,300 $ 2,600 $ 50,400 $ 6,200 2,600 50,220 100 Unfavorable - Not applicable 180 Unfavorable $ Working: Budgeted 4000 units 3800 units Direct Material Direct Labor Variable Overhead 4000 units x 3pounds x $0.6 4000 units x 0.5 hr x $16 4000 units x 0.5 hr x $2.2 3800 units x 3pounds x $0.6 3800 units x 0.5 hrx $16 3800 units x 0.5 hr x $2.2 Variance = Actual Results - Budgeted Results Variance in Expense is favorable when actual expense is less than budgeted expenses. Variance in Expense is Unfavorable when actual expense is more than budgeted expenses.