MCC Company produces one product, Motorbikes. Because of wide fluctuations in the demand for Motorbikes, the assembly department has significant variations in its monthly production levels The annual master manufacturing overhead budget is based on 300,000 direct labour hours. In July, 27,500 labour hours were worked. The master manufacturing overhead budget for the year and the actual overhead costs incurred in July are as follows: Overhead Costs Master Budget (annual) Actual in July Variable Indirect labour 330,000 $29,000 Indirect materials 180,000 14,000 Utilities 150,000 13,900 Maintenance 90,000 8,350 Fixed Supervision 150,000 12,500 Depreciation 96,000 8,000 Insurance and taxes 60,000 5,000 Total $1,056,000 $90,750 Required: Prepare a monthly flexible overhead budget for the year ending December 31, 2020, assuming monthly production levels range from 22,500 to 30,000 direct labour hours. Use increments of 2,500 direct labour hours. Prepare a budget performance report for the month of July 2020, comparing actual results with budgeted data, based on the flexible budget.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question 3
MCC Company produces one product, Motorbikes. Because of wide fluctuations in the demand for Motorbikes, the assembly department has significant variations in its monthly production levels The annual master manufacturing
|
Overhead Costs |
|
Actual in July |
|
Variable |
|
|
|
Indirect labour |
330,000 |
$29,000 |
|
Indirect materials |
180,000 |
14,000 |
|
Utilities |
150,000 |
13,900 |
|
Maintenance |
90,000 |
8,350 |
|
Fixed |
|
|
|
Supervision |
150,000 |
12,500 |
|
|
96,000 |
8,000 |
|
Insurance and taxes |
60,000 |
5,000 |
|
Total |
$1,056,000 |
$90,750 |
Required:
- Prepare a monthly flexible overhead budget for the year ending December 31, 2020, assuming monthly production levels range from 22,500 to 30,000 direct labour hours. Use increments of 2,500 direct labour hours.
- Prepare a budget performance report for the month of July 2020, comparing actual results with budgeted data, based on the flexible budget.
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