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Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Виdget Actual 12,800 Variance 2,800 (F) Volume (units) 10,000 £ £ Direct materials Other materials 105,000 132,000 27,000(A) 4,700 5,800 1,100 (A) Direct labour 135,000 145,000 105,600 32,000 10,000(A) 9,600(A) Production overheads 96,000 Head office recharges 26,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. • The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials • Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)

Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Виdget Actual 12,800 Variance 2,800 (F) Volume (units) 10,000 £ £ Direct materials Other materials 105,000 132,000 27,000(A) 4,700 5,800 1,100 (A) Direct labour 135,000 145,000 105,600 32,000 10,000(A) 9,600(A) Production overheads 96,000 Head office recharges 26,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. • The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials • Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.1.2P: Budget performance report for a cost center Sneed Industries Company sells vehicle parts to...
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Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Actual Вudget 10,000 Variance Volume (units) 12,800 2,800 (F) Direct materials 105,000 132,000 5,800 27,000(A) Other materials 4,700 1,100 (A) Direct labour 135,000 145,000 10,000(A) Production overheads 96,000 105,600 9,600(A) Head office recharges 26,000 32,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)
Transcribed Image Text:Question 2 The following report has been produced for the production department for the ABC Company for the month of June 2022: Actual Вudget 10,000 Variance Volume (units) 12,800 2,800 (F) Direct materials 105,000 132,000 5,800 27,000(A) Other materials 4,700 1,100 (A) Direct labour 135,000 145,000 10,000(A) Production overheads 96,000 105,600 9,600(A) Head office recharges 26,000 32,000 6,000 (A) Total 366,700 420,400 53,700(A) • Direct materials and other materials are variable costs. • Direct labour includes fixed salary costs of £110,000 the balance is variable. The production overhead includes a variable cost that is constant at all volume levels, and a stepped fixed cost which changes when the volume level exceeds 11,000 units. • A further analysis of the production overheads is shown below: Volume (units) 8,000 10,000 12,000 Costs (£) £91,200 £96,000 £115,800 Required a. Compute budgeted rates for • Direct materials Other materials Variable direct labor cost b. Using high-low method compute variable production overheads rate and fixed production overheads at actual volume of production c. Prepare flexed budget for the actual level of production d. Calculate variances between actual costs and flexed budget costs, state whether the variances are favorable (F) or adverse (A)
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