Centron, Inc., has the following budgeted production costs: Direct materials ..... $0.40 per unit Direct labor ........
Question:
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.
Step by Step Answer:
Financial and Managerial Accounting Using Excel for Success
ISBN: 978-1111993979
1st edition
Authors: James Reeve, Carl S. Warren, Jonathan Duchac