Question

uestions Navigation Menu ing activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: .Four welding units, with a lease cost of $15,000 per year per unit Six welding employees each paid a salary of $47,000 per year (A total of 12,000 welding hours are supplied by the six workers.) Welding supplies: $400 per job Welding hours: 4 hours used per job During the year, the activity operated at 80 percent of capacity and incurred the following actual activity and resource costs. Lease cost: $60,000 . Salaries: $296,100 Parts and supplies: $955,300 Required 1. Prepare a flexible budget formula for the welding activity using welding hours as the driver Welding cost Hide 2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based Performance Report, if variance amount is unfavorable enter "U, enter "F", if it is Favorable and enter "NA" if there is no variance. Foy Company Activity-Based Performance Report Budgeted Cost (80% level) Activity Actual Cost Budget Variance Variance Welding Fixed cost Variable cost 3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case. Welding cost

Answer 1

Answer:-

Fixed costs:

Welding units(15,000×4)=$60,000

Welders salaries(47,000×6)=$282,000

Total fixed costs=$342,000

Variable costs:

Welding supplies:$400/=$100 per welding hour(X)

Formula :

Welding cost=$342,000+$100X

2.

Activity	actual cost	budgeted cost(80%)	Budget variance	variance
Welding:
Fixed cost	$356,100 (60000+296,100)	$342,000	$14,100	U
Variable cost	$955,300	$960,000 ($100×12000×80%)	$4700	F

3.

Welding cost=$60,000+$130X

Cost of welding equipment is fixed. Variable cost is the $30 per hour of contract welding plus the $100 per hour for parts and supplies.

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