Question

Baird Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department's static budget and actual results for 2019 follow Actual Statio Results Budget 23,000 kits $144,900 Production in units 24,000 kitS $189, 600 121, 500 3৪, ৭০০ 349, 500 202,000 Direct materials 121,900 Direct labor 34,500 301,300 207,000 Variable manufacturing overhead Total variable coats Fixed manufacturing overhead $508,300 $551,500 Total manufacturing coat Required a. Convert the static budget into a flexible budget. b. Calculate the variances. Complete this question by entering your answers in the tabs below. Required A Required B Convert the static budget into a flexible budget. (Do not round intermediate calculations.) Flexible Budget Production in units 24,000 Kits Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs Required B

Answer 1

Ans. A		Flexible budget
	Production in units	24000
	Direct Materials	$151,200
	Direct Labor	$127,200
	Variable Manufacturing Overhead	$36,000
	Total variable costs	$314,400
	Fixed manufacturing overhead	$207,000
	Total manufacturing costs	$521,400
	*Flexible budget is prepared on the basis of actual units.
	*Fixed expenses remain same as static budget.
	*Calculations for variable costs in Flexible budget:
	Direct Materials	$144,900 / 23,000 * 24,000
	Direct Labor	$121,900 / 23,000 * 24,000
	Variable Manufacturing Overhead	$34,500 / 23,000 * 24,000
Ans. B		Actual results	Flexible budget	Variances	Fav./ Unf.
	Production in units	24000	24000
	Direct Materials	$189,600	$151,200	$38,400	U
	Direct Labor	$121,500	$127,200	$5,700	F
	Variable Manufacturing Overhead	$38,400	$36,000	$2,400	U
	Total variable costs	$349,500	$314,400	$35,100	U
	Fixed manufacturing overhead	$202,000	$207,000	$5,000	F
	Total manufacturing costs	$551,500	$521,400	$30,100	U
	Flexible budget variance   =   Actual results - Flexible budget
	*Increase in revenue or net operating income and decrease in expenses from flexible budget to actual results =   Favorable.
	*Decrease in revenue or net operating income and increase in expenses from flexible budget to actual results =   Unfavorable.