The Burling Company had the following performance report for the month ended June 30, 19_1: MASTER BUDGET
Question:
The Burling Company had the following performance report for the month ended June 30, 19_1:
MASTER BUDGET (STATIC) FORMULA ACTUAL BUDGET VARIANCE PER UNIT Variable costs:
Direct material $ 21,350 $ 27,000 $e5- 65085 $ 3.00 Direct labor 61,500 72,000 10,500 F 8.00 Labor to transport materials internally and provide general support 11,100 14,400 3,300 F 1.60 Idle time 3,550 3,600 50 F .40 Cleanup time 2,500 2,700 200 F .30 Other indirect labor 800 900 100 F 10 Miscellaneous supplies ; 4,700 5,400 700 F .60 Variable manufacturing costs $105,500 $126,000 $20,500 F $14.00*
Fixed costs:
Factory supervision $ 14,700 $ 14,400 $ 300U Rent of factory 5,000 5,000 _ Depreciation of factory equipment 15,000 15,000 _ Other fixed factory costs 2,600 2,600 —
Fixed manufacturing costs $ 37,300 $ 37,000 $ 300 U Total manufacturing costs $142,800 $163,000 $20,200 F F = Favorable cost variances occur when actual costs are less than budgeted costs.
U = Unfavorable The general manager was unhappy about not achieving the original production target of 9,000 units, which was the basis for the master (static) budget. Actual production was only 7,000 units. However, she was pleased that all variable manufacturing costs had favorable budget variances.
. Prepare a performance report that might provide a better explanation of what has happened. Indicate whether each variance is favorable or unfavorable. Some managers would contend that the fixed costs do not belong in this report. Do you agree? Why?
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