5. Performance budget and variance analysis. 25 points.
Good Day Company prepared a budget for 2019. At the end of the year, management
compared the static budget with the actual results. They are alarmed because they spent
so much more than they planned. Here are the figures (costs only):
			Good Day Company Performance Report
				Actual		Budget		Variance
	Units of production			133,800		126,000
	Manufacturing costs
	Direct materials			$862,800		$819,000		$43,800	U
	Direct labor			1,093,572		1,039,500		54,072	U
	Overhead
	Variable OH
	Indirect labor			$225,108		$204,120		$20,988	U
	Supplies			66,600		71,820		5,220	F
	Repairs			47,952		41,580		6,372	U
	Total variable OH			$339,660		$317,520		$22,140	U
	Fixed OH
	Insurance			15,120		$14,400		720	U
	Rent			43,200		43,200		-
	Depreciation			36,000		36,000		-
	Supervisor salaries			77,400		75,600		1,800	U
	Total fixed OH			$171,720		$169,200		$2,520	U
	Total overhead			$511,380		$486,720		$24,660	U
	Total manufacturing costs			$2,467,752		$2,345,220		$122,532	U
Required:
a) Prepare a revised budget report including variances for Good Day Company for 2019.
b) Write a paragraph in proper English, explaining to Good Day executives why they should or should not be
concerned about the $122,532 excess costs. Be brief.
c) Give two possible reasons why actual direct labor dollars would not be equal to the direct labor dollars in
the revised budget.