Question

The following overhead data are for a department in a large company:
				Actual Costs	Static
				Incurred	Budget
	Activity Level - units			250	220
	Variable Costs:
		Indirect Materials		$8,745	$7,634
		Power		$2,065	$1,738
	Fixed Costs:
		Supervision		$1,560	$1,600
		Rent		$7,210	$7,300
Required:
Prepare a Flexible Budget Performance Report that would be useful in assessing how well costs were controlled in this department.

Answer 1

Ans.	Flexible Budget Performance Report
	For the Month Ended
		Actual Results	Revenue & Spending variance		Flexible Budget
	Activity level	250			250
	Variable costs:
	Indirect materials	$8,745	$70	U	$8,675
	Electricity	$2,065	$90	U	$1,975
	Total variable costs (a)	$10,810	$160	U	$10,650
	Fixed costs:
	Supervision	$1,560	$40	F	$1,600
	Rent	$7,210	$90	F	$7,300
	Total fixed costs (b)	$8,770	$130	F	$8,900
	Total cost (a + b)	$19,580	$30	U	$19,550
	Calculations of flexible budge:
	*Fixed cost remain same as static budget.
	*Variable costs are calculated on number of actual units.
	Indirect materials	$7634 / 220 * 250	8675
	Electricity	$1738 / 220 * 250	1975
	*Flexible budget is prepared on the basis of actual Number of parties.
	*Revenue and spending variance = Actual results - Flexible budget.
	*Increase in costs from flexible to actual   = Unfavorable.
	*Decrease in costs from flexible to actual= Favorable.