Question

Adrian Power manufactures small power supplies for car stereos. The company uses flexible budgeting techniques to deal with the seasonal and cyclical nature of the business. The accounting department provided the accompanying data on budgeted manufacturing costs for the month of January:
ADRIAN POWER
Planned Level of Production for January
Budgeted production (in units)........ 14,000
Variable costs (vary with production)
Direct materials .............. $ 140,000
Direct labor................ 224,000
Indirect labor................ 21,000
Indirect materials............. 10,500
Maintenance................ 6,300
Fixed costs
Supervision............... 24,700
Other (depreciation, taxes, etc.) ........ 83,500
Total plant costs.............. $ 510,000
Actual operations for January are summarized as
ADRIAN POWER
Actual Operations for January
Actual production (in units).......... 15,400
Actual costs incurred
Direct materials.............. $ 142,400
Direct labor ............... 259,800
Indirect labor ............. 27,900
Indirect materials............. 12,200
Maintenance............... 9,800
Supervision............... 28,000
Other costs (depreciation, taxes, etc.)..... 83,500
Total plant costs.............. $ 563,600

Required:
a. Prepare a report comparing the actual operating results with the flexible budget at actual production.
b. Write a short memo analyzing the report prepared in ( a ). What likely managerial implications do you draw from this report? What are the numbers telling you?



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  • CreatedDecember 15, 2014
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