Our initial plan was to make and sell 500 wrenches. We budgeted 2 lbs. of steel...
Our initial plan was to make and sell 500 wrenches. We budgeted 2 lbs. of steel for each wrench, and expected to pay $1.50 per pound for the steel. We budgeted $20 per hour for labor, and expected it to take 3 hours to make each tool. Our initial plan was to sell the 500 wrenches for $120 each. We budgeted $8000 for insurance (fixed overhead), and we decided to use labor hours as the driver for allocating utilities costs (variable overhead). We expected to have $12,000 in utilities costs. ACTUAL RESULTS (1) We receive an order for 550 units at $125.00 each (2) We purchase 1,400 lbs. of materials., paying 1,960.00, or $1.40 per lb. (3) We drawdown 1250 lbs. materials to produce 550 wrenches . (4) We drawdown (pay) $21.00 hr. for 1640 hours of labor to produce the 550 wrenches. (5) We incur variable overhead expenses (ex. - utilities) of $11,890.00. Variable overhead is applied using the budgeted Var. OH application rate. (6) Fixed overhead (insurance)costs are $7,800. Fixed overhead is deemed to be a period expense. (7) We sell all 550 units at $125 each. PART ONE: Required Prepare in good order a Master Budget Income Statement. Prepare in good order a Flexible Budget Income Statement, based on actual production. Prepare in good order an Actual Results Income Statement.
Homework Answers
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| Workings for Master Budget, Flexible Budget and Actual Income Statement |
| Sales Revenue |
 Master |
Flexible | Actual |
Note |
| 500.00 | 550.00 | 550.00 | A | |
| Sell price per unit | 120.00 | 120.00 | 125.00 | B |
| Sales Revenue | 60,000.00 | 66,000.00 | 68,750.00 | C=A*B |
| Cost of Direct Material used |
Master |
Flexible | Actual | |
| Sales units | 500.00 | 550.00 | See A | |
| Steel required per unit | 2.00 | 2.00 | D | |
| Steel required/ used | 1,000.00 | 1,100.00 | 1,250.00 | E=A*D |
| Cost per pound | 1.50 | 1.50 | 1.40 | F |
| Cost of Direct Material used | 1,500.00 | 1,650.00 | 1,750.00 | G=E*F |
| Direct Labor cost |
Master |
Flexible | Actual | |
| Sales units | 500.00 | 550.00 | See A | |
| Direct Labor hour per unit | 3.00 | 3.00 | H | |
| Direct Labor hour required | 1,500.00 | 1,650.00 | 1,640.00 | I=A*H |
| Labor Cost per hour | 20.00 | 20.00 | 21.00 | J |
| Direct Labor cost | 30,000.00 | 33,000.00 | 34,440.00 | K=I*J |
| Variable manufacturing overhead per unit |
|
|
||
| Utilities costs | 12,000.00 |
|
||
| Direct Labor hours- Master Budget | 1,500.00 |
|
||
| Variable manufacturing overhead per hour | 8.00 |
|
||
| Flexible Direct Labor hours | 1,650.00 |
|
||
| Flexible Variable manufacturing overhead | 13,200.00 |
|
| Variable manufacturing overhead |
|
Flexible | Actual | ||
| Utilities costs | 12,000.00 | 13,200.00 | 11,890.00 | See workings above | |
| Variable manufacturing overhead | 12,000.00 | 13,200.00 | 11,890.00 | ||
| Fixed manufacturing overhead |
|
Flexible | Actual | ||
| Insurance | 8,000.00 | 8,000.00 | 7,800.00 | ||
| Fixed manufacturing overhead | 8,000.00 | 8,000.00 | 7,800.00 |
| Master Budget Income Statement |
|
|
|||||
| Sales | 60,000.00 |
|
|||||
| Less: Variable cost |
|
||||||
| Cost of Direct Material used | 1,500.00 | See G | |||||
| Direct Labor cost | 30,000.00 |
|
|||||
| Variable manufacturing overhead | 12,000.00 |
|
|||||
| Total Variable cost | 43,500.00 | ||||||
| Contribution margin | 16,500.00 | ||||||
| Less: Fixed manufacturing overhead | 8,000.00 | ||||||
| Budgeted Income | 8,500.00 | ||||||
| Flexible Budget Income Statement |
|
|
|||||
| Sales | 66,000.00 |
|
|||||
| Less: Variable cost | |||||||
| Cost of Direct Material used | 1,650.00 |
|
|||||
| Direct Labor cost | 33,000.00 |
|
|||||
| Variable manufacturing overhead | 13,200.00 |
|
|||||
| Total Variable cost |
|
||||||
| Contribution margin | 18,150.00 | ||||||
| Less: Fixed manufacturing overhead | 8,000.00 | ||||||
| Flexible Budget Income | 10,150.00 | ||||||
| Actual Income Statement |
|
|
|||||
| Sales | 68,750.00 |
|
|||||
| Less: Variable cost | |||||||
| Cost of Direct Material used | 1,750.00 |
|
|||||
| Direct Labor cost | 34,440.00 |
|
|||||
| Variable manufacturing overhead | 11,890.00 |
|
|||||
| Total Variable cost | 48,080.00 | ||||||
| Contribution margin |
|
||||||
| Less: Fixed manufacturing overhead | 7,800.00 | ||||||
| Actual Income | 12,870.00 |
Add Answer to:
Our initial plan was to make and sell 500 wrenches. We budgeted
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INITIAL BUDGET INFORMATION Our initial plan was to make and sell 500 wrenches. We budgeted 2 lbs. of steel for each wrench, and expected to pay $1.50 per pound for the steel. We budgeted $20 per hour for labor, and expected it to take 3 hours to make each tool. Our initial plan was to sell the 500 wrenches for $120 each. We budgeted $8000 for insurance (fixed overhead), and we decided to use labor hours as the driver for...
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shedule 3
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