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Braemar saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. The following annual performance report for the custom saddle production
| Braemar saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. | |||||||||
| The following annual performance report for the custom saddle production department was present to the president of the company: | |||||||||
| Budgeted Costs for 5,000 Units | Actual Costs | Over(under) | |||||||
| Per Unit | Total | Incurred | Budget | ||||||
| Variable manufacturing costs: | |||||||||
| Direct materials | $ 30.00 | $ 150,000.00 | $ 171,000.00 | $ 21,000.00 | |||||
| Diirect labor | $ 48.00 | $ 240,000.00 | $ 261,500.00 | $ 21,500.00 | |||||
| Indirect labor | $ 15.00 | $ 75,000.00 | $ 95,500.00 | $ 20,500.00 | |||||
| Indirect materials, supplies, etc. | $ 9.00 | $ 45,000.00 | $ 48,400.00 | $ 3,400.00 | |||||
| Total variable manufacturing costs | $ 102.00 | $ 510,000.00 | $ 576,400.00 | $ 66,400.00 | |||||
| Fixed manufacturing costs: | |||||||||
| Lease rental | $ 9.00 | $ 45,000.00 | $ 45,000.00 | $ - | |||||
| Salaries of foremen | $ 24.00 | $ 120,000.00 | $ 125,000.00 | $ 5,000.00 | |||||
| Depreciation and other | $ 15.00 | $ 75,000.00 | $ 78,600.00 | $ 36,000.00 | |||||
| Total fixed manufacturing costs | $ 48.00 | $ 240,000.00 | $ 248,600.00 | $ 8,600.00 | |||||
| Total manufacturing costs | $ 150.00 | $ 750,000.00 | $ 825,000.00 | $ 75,000.00 | |||||
| Although a production volume of 5,000 saddles was originally budgeted for the year, the actual volume of production achieved for the year | |||||||||
| was 6,000 saddles. Direct materials and direct labor are charged to production at actual cost. Factory overhead is applied to production at the | |||||||||
| predetermined rate of 150 percent of the actual direct labor cost. | |||||||||
| After a quick glance at the performance report showing an unfavorable manufacturing cost variance of $75,000, the president said to the | |||||||||
| accountant: "Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our | |||||||||
| budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs." | |||||||||
| Instructions | |||||||||
| a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but | |||||||||
| revise the budgeted cost figures to reflect the actual production level of 6,000 saddles. | |||||||||
| b. Briefly comment on Braemar's ability to control its variable manufacturing costs. | |||||||||
| c. What is the amount of over- or underapplied manufacturing overhead for the year? | |||||||||
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
7th Edition
978-0-538-4527, 0-538-45274-9, 978-1133161646
