Question
Activity-Based Flexible Budgeting Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used
Activity-Based Flexible Budgeting
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
Four welding units, with a lease cost of $14,000 per year per unit
Six welding employees each paid a salary of $54,000 per year (A total of 9,000 welding hours are supplied by the six workers.)
Welding supplies: $300 per job
Welding hours: 3 hours used per job
During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs.
Lease cost: $56,000
Salaries: $340,200
Parts and supplies: $849,600
Required:
1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.
Welding cost | = | $ | + | $ X |
2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based Performance Report, if variance amount is unfavorable select "U" , select "F", if it is Favorable and select "NA" if there is no variance.
Foy Company | ||||
Activity-Based Performance Report | ||||
Activity | Actual Cost | Budgeted Cost (95% level) | Budget Variance | Variance |
Welding: | ||||
Fixed cost | $ | $ | $ | |
Variable cost |
3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case.
Welding cost | = | $ | + | $ X |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started