Question

Gundy Company expects to produce 1,200,000 units of Product XX in 2017. Monthly production is expected to range from 70,000 to 100,000 units. Budgeted variable manufacturingcosts per unit are: direct materials $3, direct labor $6, and overhead $9. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision are $1.

In March 2017, the company incurs the following costs in producing 85,000 units: direct materials $275,000, direct labor $509,000, and variable overhead overhead $767,000

Answer 1

		Monthly Flexible Manufacturing Budget
					Difference
			Budget	actual
units produced			85,000	85,000
Variable costs:
Direct materials			255000	275,000	20,000	U
Direct labor			510000	509,000	1,000	F
overhead			765000	767,000	2,000	U
total variable costs			1530000	1,551,000	21,000	U
fixed costs
Depreciation			400000	400000	0	N
supervision			100000	100000	0	N
total fixed cost			500000	500000	0	N
total costs			2030000	2,051,000	21,000	U
	fixed cost
	depreciation		1,200,000*4/12
			400000
	Supervision		1,200,000*1/12
			100000