Montgomery Company has developed the following flexible budget formulas for its four overhead items: Variable rate per Overhead item Fixed cost direct labor hour Maintenance $10,000 $ 3.00 Power $ 1,500 $ 0.30 Indirect labor cost $12.00 Equipment lease $ 7,000 Total $18,500 $15.30 Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year, 19,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance $14,000 Power $ 2,200 Indirect labor cost $70,000 Equipment lease $ 7,000 Total costs $93,200 Using an after-the-fact flexible budget, calculate the variance for power. a.$1,010 U b.$3,000 U c.$1,000 F d.$1,010 F e.None of these choices are correct.
Montgomery Company has developed the following flexible budget formulas for its four overhead items: Variable rate per Overhead item Fixed cost direct labor hour Maintenance $10,000 $ 3.00 Power $ 1,500 $ 0.30 Indirect labor cost $12.00 Equipment lease $ 7,000 Total $18,500 $15.30 Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year, 19,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance $14,000 Power $ 2,200 Indirect labor cost $70,000 Equipment lease $ 7,000 Total costs $93,200 Using an after-the-fact flexible budget, calculate the variance for power. a.$1,010 U b.$3,000 U c.$1,000 F d.$1,010 F e.None of these choices are correct.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 13CE: Nashler Company has the following budgeted variable costs per unit produced: Budgeted fixed overhead...
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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
Montgomery Company has developed the following flexible budget formulas for its four overhead items:
Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year, 19,000 units were produced with the following actual costs:
Using an after-the-fact flexible budget, calculate the variance for power.
| Variable rate per | ||
| Overhead item | Fixed cost | direct labor hour |
| Maintenance | $10,000 | $ 3.00 |
| Power | $ 1,500 | $ 0.30 |
| Indirect labor cost | $12.00 | |
| Equipment lease | $ 7,000 | |
| Total | $18,500 | $15.30 |
Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however, this year, 19,000 units were produced with the following actual costs:
| Overhead item | Actual costs |
| Maintenance | $14,000 |
| Power | $ 2,200 |
| Indirect labor cost | $70,000 |
| Equipment lease | $ 7,000 |
| Total costs | $93,200 |
Using an after-the-fact flexible budget, calculate the variance for power.
a.$1,010 U
b.$3,000 U
c.$1,000 F
d.$1,010 F
e.None of these choices are correct.
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