Centron, Inc., has the following budgeted production costs:

Direct materials………………………………………….$0.40 per unit

Direct labor………………………………………………..1.80 per unit

Variable factory overhead…………………………………2.20 per unit

Fixed factory overhead

Supervision…………………………………………………….$24,000

Maintenance…………………………………………………….18,000

Other…………………………………………………………….12,000

The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively.

During the recent quarter ended March 31, Centron produced 25,500 units and incurred the following costs:

Direct Materials……………………………$10,710

Direct Labor…………………………………47,175

Variable factory overhead…………………..51,940

Fixed factory overhead

Supervision…………………………………24,500

Maintenance………………………………...23,700

Other………………………………………..16,800

Total production costs …………………...$174,825

Instructions:

a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity.

b. Was Centron's experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer.

c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance.

Answer rating: 100% (QA)

a Units 20000 22500 25000 Direct materials 040 per unit 8000 9000 10000 Direct labor 180 per unit 36... View the full answer