Platinum Status Ltd uses an annual flexible budget based on standard direct machine hours for the following factory overhead items.

Required

(a) Why is a flexible budget performance report a better basis for assessing a manager’s performance than a fixed budget performance report?

(b) Prepare a flexible budget for the three cost items using 12 000, 15 000 and 18 000 direct machine hours.

(c) Prepare a flexible budget performance report for the three cost items, based on the actual results for the year.

Transcribed Image Text:

Supplies Electricity Indirect labour Fixed cost $16000 19600 Variable cost per standard direct machine hour $0.30 0.20 24 400 1.10 During the year, 18 000 direct machine hours were recorded for the production achieved. The following actual costs were incurred. Variable costs: Supplies Electricity Indirect labour Fixed costs: Supplies Electricity Indirect labour $ 5100 3700 19 800 $16500 18800 24 400