ADM 2341 Lecture Notes - Lecture 29: Variable Cost

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lilachippopotamus32

22 Apr 2018

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Step 1: identify the activity index and the relevant range of activity. > the activity index is direct labour hours. Management concludes that the relevant range is 8,000 to 12,000 direct labour hours per month. Step 2: identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost. The variable cost per unit is found by dividing each total budgeted cost by the direct labour hours that are used in preparing the master budget (120,000 hours). Step 3: identify the xed costs, and determine the budgeted amount for each cost. Since fox wants monthly budget data, it nds the budgeted amount by divid- ing each annual budgeted cost by 12. For fox, the monthly budgeted xed costs are depreciation ,000, supervision ,000, and property taxes ,000. Step 4: prepare the budget for selected increments of activity within the relevant range. > management decides to prepare the budget in increments of 1,000 direct labour hours.

Related Questions

Gundy Company expects to produce 1,200,000 units of Product XX in 2017. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments. (List variable costs before fixed costs.)

greyleopard313

Question 3 12 Marks Esquire Clothing is a manufacturer ofdesigner suits. The cost of each suit is the sum of three variablecosts (direct material costs, direct manufacturing labour costs,and manufacturing overhead costs) and one fixed-cost category(manufacturing overhead costs). Variable manufacturing overheadcost is allocated to each suit on the basis of budgeted directmanufacturing labour-hours per suit. For June 2015, each suit isbudgeted to take 4 labour hours. Budgeted variable manufacturingoverhead cost per labour-hour is $12. The budgeted number of suitsto be manufactured in June 2015 is 1,040. Actual variablemanufacturing costs in June 2015 were $52,164 for 1,080 suitsstarted and completed. There were no beginning or endinginventories of suits. Actual direct manufacturing labour-hours forJune were 4,536. a) Compute the flexible-budget variance, thespending variance, and the efficiency variance for variablemanufacturing overhead. (8 marks) Question 3 continued over nextpage Term 1 STANDARD Examination 2016 Foundations of ManagementAccounting â ACCT20076 Page 10 of 11 Question 3 continued b)Comment on the spending and efficiency variances calculated.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________(4 marks) Question

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Myers company uses a flexible budget for manufactoring overhead based on direct labor hours.Variable manufactoring overhead costs per direct labor hour as follows.
Indirect labor $1.20
Indirect materials .70
Utilities .20

Fixed overhead costs per month are supervision $4300, Depreciation $2000, and property taxes $700. The company believes it will normally operate in a range of $8100 -12000 direct labor hours per month.

Prepare a monthly manufactoring overhead flexible budget for 2017 for the expected range of activity, using increments of 1300 direct labor hours

manufactoring overhead flexible budget for 2017
Activity level
Direct labor hours _______ ________ ________ ________
Variable costs
Indirect labor _______ ________ _______ _______
Indirect materials ________ ______ _____ ______
Utilities _____ ____ _____ _____
total variable costs _____ _____ _____ _____
Fixed costs
Depreciation _____ _____ _____ _____
Propety taxes _____ ______ ____ ______
Supervision ____ ____ ____ ____
Total fixed costs ____ ____ ____ ____
Total costs ___ _____ ____ ____

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ADM 2341 Lecture Notes - Lecture 29: Variable Cost

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