E10-9

Prepare flexible budget report, and answer question.

(LO 1, 2), E

As sales manager, Joe Batista was given the following static budget report for selling expenses in

the Clothing Department of Soria Company for the month of October.

SORIA COMPANY Clothing Department Budget Report For the Month Ended October 31, 2017
			Difference
	Budget	Actual	Favorable F Unfavorable U
Sales in units	8,000	10,000	2,000	F
Variable expenses
Sales commissions	$ 2,400	$ 2,600	$ 200	U
Advertising expense	720	850	130	U
Travel expense	3,600	4,100	500	U
Free samples given out	1,600	1,400	200	F
Total variable	8,320	8,950	630	U
Fixed expenses
Rent	1,500	1,500	-0-
Sales salaries	1,200	1,200	-0-
Office salaries	800	800	-0-
Depreciationautos (sales staff)	500	500	-0-
Total fixed	4,000	4,000	-0-
Total expenses	$12,320	$12,950	$ 630	U

As a result of this budget report, Joe was called into the president's office and congratulated on

his fine sales performance. He was reprimanded, however, for allowing his costs to get out of

control. Joe knew something was wrong with the performance report that he had been given.

However, he was not sure what to do, and comes to you for advice.

Instructions

(a)

Prepare a budget report based on flexible budget data to help Joe.

(b)

Should Joe have been reprimanded? Explain.

P10-1A

(XLS)

Prepare flexible budget and budget report for manufacturing overhead.

(LO 2), AN

Bumblebee Company estimates that 300,000 direct labor hours will be worked during the

coming year, 2017, in the Packaging Department. On this basis, the budgeted manufacturing

overhead cost data, shown, are computed for the year.

Fixed Overhead Costs		Variable Overhead Costs
Supervision	$96,000	Indirect labor	$126,000
Depreciation	72,000	Indirect materials	90,000
Insurance	30,000	Repairs	69,000
Rent	24,000	Utilities	72,000
Property taxes	18,000	Lubricants	18,000
	$240,000		$375,000

It is estimated that direct labor hours worked each month will range from 27,000 to 36,000

hours.

During October, 27,000 direct labor hours were worked and the following overhead costs were

incurred.

Fixed overhead costs: supervision $8,000, depreciation $6,000, insurance $2,460, rent

$2,000, and property taxes $1,500.

Variable overhead costs: indirect labor $12,432, indirect materials $7,680, repairs $6,100,

utilities $6,840, and lubricants $1,920.

Instructions

(a)

Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct

labor hours over the relevant range for the year ending December 31, 2017.

(a) Total costs: DLH 27,000, $53,750; DLH 36,000, $65,000

(b)

Prepare a flexible budget report for October.

(b) Total $1,182 U

(c)

Comment on management's efficiency in controlling manufacturing overhead costs in October.