Question

customers salonformant Path table body ld Remaining Time: 1 hour, 29 minutes, 14 seconds. Question Completion Status: QUESTION 34 In the month of May, 2017, the Budget Officer presented the following Forrest Glump Company is excited about its newly implemented budgeting program. budget report FORREST GLUMP COMPANY BUDGET REPORT FOR THE MONTH ENDED MAY 31, 2017 ference Favorable F Production Costa Budget Actual Unfavorable Variable Costs Direct Materials $ 57,600 $ 56.400 $ 1,200 F Direct labor 64,800 61.440 3.360 F Indirect materials 28.800 29.040 240U Indirect labor 21,600 21.000 600 F 10.000 17.880 120 F Malatenance 7200 7400 200U Total Variable 198 000 193 200 100F Fred costs Rant 14400 14.000 Depreciation 7.200 Sution 20400 2049 Total fed 42.000 42000 Total costs 51240020 51235 200 543COF 7200 The Way budget reported above is based on expected manufacturing of 72 000 units per month (064000 annually While the budget officer is fairly happy about the report the CEO Forrest Gump is not so mused His expectation was that the company would sell close to 70 000 You are a summer intern and have been asked to comment on this matter. C ard S tate and the Soul to sell am

Answer 1

No I don’t agree with the report presented ,because for performance appraisal flexible
budget should have been used where in the cost is calculated for the actual production at the
standard cost. and also it offers flexibility and static budget is rigid and is based on estimates
			flexible
			Budget	Actual	Difference
	production units		70,000	70,000
	variable costs
Direct materials (57600/72000)=.8*70,000			56000	56,400	400	U
Direct labor (64800/72000)= .90*70,000			63000	61,440	1560	F
Indirect mat(28800/72000)=.4*70,000			28000	29,040	1040	U
indirect labo(21600/72000)=.3*70,000			21000	21,000	0	N
Utiltiies (18000/72000)=.25*70,000			17500	17,880	380	U
Mainten(7200/72000)=.1*70000			7000	7,440	440	U
total variable cost			192500	1,93,200	700	U
Fixed Costs:
Rent			14,400	14,400	0	N
Depreciation			7,200	7,200	0	N
Supervision			20,400	20,400	0	N
total fixed			42,000	42,000	0	N
total expense			2,34,500	2,35,200	700	U
In june 76,800 is produced , that is good in the sense the production increased
but it will not change the variances since actual cost is more than standard cost
If the actual cost is to increase by 10% , then variances will increase further by
10% .