Question
Adarmes Adventures manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and
Adarmes Adventures manufactures aluminum canoes. In planning for the coming year, CFO Alexis King is considering three different sales targets: 2,500 canoes, 3,000 canoes, and 3,500 canoes. Canoes sell for $800 each. The standard variable cost information for a canoe is as follows.
Direct materials | $ | 300 | ||
Direct labor | 150 | |||
Variable overhead | ||||
Utilities | 35 | |||
Indirect material | 30 | |||
Indirect labor |
| 60 | ||
Total | $ | 575 |
Annual fixed overhead cost is expected to be:
Maintenance | $ | 20,000 | ||
Depreciation | 40,000 | |||
Insurance | 27,000 | |||
Rent |
| 30,000 | ||
Total | $ | 117,000 |
Alexis King chose to prepare a static budget based on sales of 3,000 canoes. Actual sales were 3,100 canoes at a price of $850 each. The company incurred the following costs for the year:
Direct material | $ | 910,000 | |
Direct labor | 435,000 | ||
Variable overhead | 398,000 | ||
Fixed overhead |
| 125,000 | |
Total | $ | 1,868,000 |
Prepare a performance report for the year that shows the flexible budget and sales volume variances.
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