Exercise 15-10 Evaluating a cost center including flexible budgeting concepts LO 15-3, 15-4, 15-5

Koch Medical Equipment Company makes a blood pressure measuring kit. Albert Kaiser is the production manager. The production departments static budget and actual results for 2015 follow.

	Static Budget			Actual Results
Production in units		39,000	kits		40,200	kits
Direct materials	$	237,900		$	284,020
Direct labor		198,900			198,520
Variable manufacturing overhead		58,500			62,900
Total variable costs		495,300			545,440
Fixed manufacturing overhead		205,000			199,800
Total manufacturing cost	$	700,300		$	745,240

Required

a.	Convert the static budget into a flexible budget. (Do not round intermediate calculations.)

b.	Calculate variances and indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Required a. Convert the static budget into a flexible budget. (Do not round intermediate calculations.) Flexible Budget 40,200 Kits Production in units 230,799X Direct materials Direct labor 191,963X 56,754X Variable manufacturing overhead 479,516 Total variable costs 205,000 Fixed manufacturing overhead 684,516 Total manufacturing costs *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted b. Calculate variances and indicate the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) Variances (53,401)X U Direct materials 6,557X F Direct labor (6,146)X U Variable manufacturing overhead (65,924)X U Total variable costs 5,200 F Fixed manufacturing overhead (60,724)XU Total manufacturing costs