A meeting of the budget committee at Lovely Loaves Bakery has been called to discuss the performance

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Question:

A meeting of the budget committee at Lovely Loaves Bakery has been called to discuss the performance of the dough department, which makes the basic dough mixture used in the bakery's range of breads, during the month of March 2018.

The organization's accountant has produced the following information sheet, which is to be circulated to the budget committee before the meeting.

DOUGH DEPARTMENT

MARCH 2018

Information for Budget Committee

(a) At the beginning of March we budgeted that 10,000 kgs of dough would be made during the month but 10,500 kgs were actually made.

(b) Based on the original budget of 10,000 kgs, we budgeted that the employees making the dough ('dough mixers') would work for 1,000 hours, although they would only be mixing dough for 975 hours. The actual hours were 1,100, although idle time accounted for 8 of those hours.

(c) The salary of the dough mixers, which is treated as a fixed cost, was budgeted to be $13,000 in total. Actual cost was $12,000.

(d) The arrangement, set up with the dough mixers' union at the beginning of 2018, that a bonus (to be shared) of $1,300 would be paid if monthly output was greater than 9,800 kgs, continued during March.

(e) The dough department is cleaned at the end of every working day by employees of the cleaning department. As budgeted, the cleaning department charge for the month was 10¢ for every kilogram of dough made.

(f) The dough mixers are entitled to use the staff canteen. The facility was charged to the department on the basis of 20¢ per productive hour worked by the dough mixers, the same basis as that set in the budget.

(g) Sundry fixed overheads were $6,000. This amount was 20% above budget.

(h) Overheads are charged at a budgeted rate per kilogram of dough made based on budget information. Variance analysis is performed at the end of every month and variances are written off to variance accounts.

REQUIRED:

(a) Calculate the budgeted cost of making one kilogram of dough as per the static budget.

(b) Prepare a flexible budget for the dough department for March 2018. Compare the flexed budget with actual expenditure and show any flexible budget variances.