Question

Fanning Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department’s static budget and actual results for 2019 follow:

	Static Budget					Actual Results
Production in units	30,000 kits					32,400 kits
Direct materials		$	201,000				$	255,080
Direct labor			171,000					178,380
Variable manufacturing overhead			45,000					51,300
Total variable costs			417,000					484,760
Fixed manufacturing overhead			213,000					208,800
Total manufacturing cost		$	630,000				$	693,560

Required

a. Convert the static budget into a flexible budget.

b. Calculate the variances.

• Required A
• Required B

Convert the static budget into a flexible budget. (Do not round intermediate calculations.)

	Flexible Budget Production in units 32,400 Kits Direct materials Direct labor Variable manufacturing overhead Total variable costs 0 Fixed manufacturing overhead Total manufacturing costs $0

Calculate the variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Variances Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs

Answer 1

		Static Budget	Static Budget				Actual Results
	Production in units	30,000 kits	Per Kit Cost				32,400 kits
	Direct materials	201,000	6.70				255,080
	Direct labor	171,000	5.70				178,380
	Variable manufacturing overhead	45,000	1.50				51,300
	Total variable costs	417,000	13.90				484,760
	Fixed manufacturing overhead	213,000					208,800
	Total manufacturing cost	630,000					693,560
A
		Flexible Budget
	Production in units	32,400 kits
	Direct materials	217,080	(32400*VC Per Kit)
	Direct labor	184,680
	Variable manufacturing overhead	48,600
	Total variable costs	450,360
	Fixed manufacturing overhead	213,000
	Total manufacturing cost	663,360
B		Flexible Budget	Actual Results	Variance	Variance
	Production in units	32,400 kits	32,400 kits	Amount	Type
	Direct materials	217080	255,080	-38,000	U
	Direct labor	184680	178,380	6,300	F
	Variable manufacturing overhead	48600	51,300	-2,700	U
	Total variable costs	450360	484,760	-34,400	U
	Fixed manufacturing overhead	213000	208,800	4,200	F
	Total manufacturing cost	663360	693,560	-30,200	U