Braemar Saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. The following annual performance report for the custom saddle production department was presented to the president of the company:

Although a production volume of 5,000 saddles was originally budgeted for the year, the actual volume of production achieved for the year was 6,000 saddles. Direct materials and direct labor are charged to production at actual cost. Factory overhead is applied to production at the predetermined rate of 150 percent of the actual direct labor cost.
After a quick glance at the performance report showing an unfavorable manufacturing cost variance of $75,000, the president said to the accountant: “Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs.”

Instructions
a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles.
b. Briefly comment on Braemar’s ability to control its variable manufacturing costs.
c. What is the amount of over- or underapplied manufacturing overhead for theyear?

Transcribed Image Text:

Budgeted Costs for 5,000 Units Actual Costs (Under) Over Per Unit Incurred Budget Variable manufacturing costs Direct materials Direct labor. Indirect labor Indirect materials, supplies, etc.····.. ..__ . . . . 30.00 $150,000 $171,000 $21,000 48.00 240,000 261,500 21,500 95,500 20,500 3,400 9.00 45,000 48,400 Total variable manufacturing costs.. . $102.00 $510,000 $576,400 $66,400 Fixed manufacturing costs Lease rental Salaries of foremen.. Depreciation and other. S 9.00 45,000 $45,000-0- 24.00 120,000 25,000 $ 5,000 15.00 75,000 78,600 3,600 Total fixed manufacturing costs . . . 48.00 $240,000 $248,600 8,600 Total manufacturing costs. $150.00 $750,000 $825,000 $75,000