Question

leason Guitars produces acoustic guitars. The table below contains budget and actual Information for the month of June: (Indicate he effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Actual Costs 385 units Spending Variance Flexible Budget 385 units Volume Variance Master Budget 200 units $ Direct Material Direct Labor Variable Overhead Fixed Overhead Total Manufacturing Costs 17,100 27,800 9,850 13,100 67,850 15,600 23,600 9,600 11,800 60,600 $

Answer 1

Ans.	Flexible Budget Performance Report
		Actual Costs	Spending variance		Flexible Budget	Activity variance		Planning Budget
		385 units			385 units			200 units
	Direct Materials	$17,100	$12,930	F	$30,030	$14,430	U	$15,600
	Direct Labor	$27,800	$17,630	F	$45,430	$21,830	U	$23,600
	Variable Overhead	$9,850	$8,630	F	$18,480	$8,880	U	$9,600
	Fixed overhead	$13,100	$1,300	U	$11,800	$0	none	$11,800
	Total manufacturing costs	$67,850	$37,890	F	$105,740	$45,140	U	$60,600
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as static budget.
	*Calculations for variable costs in Flexible budget:
	Flexible budget variable costs = Planning budget variable costs / Planned units * Actual units
	Direct Materials	$15,600 / 200 * 385
	Direct Labor	$23,600 / 200 * 385
	Variable Overhead	$9,600 / 200 * 385
	Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Increase in expenses from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget =   Favorable.