Flexible budget and responsibility report

Rainbow Ltds manufacturing overhead budget for the first quarter of the current year was prepared on the basis of the planned output of 4,000 units and contained the following data:

Variable costs Fixed costs

Indirect materials $14,000 Supervisor salaries $36,000

Indirect labour 10,000 Depreciation 7,000

Utilities 9,000 Taxes and insurance 8,000

Maintenance 5,000 Maintenance 5,000

Actual variable costs were: indirect materials $13,800, indirect labour $9,600, utilities $8,700, and maintenance $4,200.

Actual fixed costs equalled budgeted fixed costs except for taxes and insurance which were $8,400.

Actual output for the quarter was 4,500 units.

All costs are considered controllable by the production department manager, except for depreciation, and taxes and insurance.

Requirements:

(a) Prepare a flexible budget manufacturing overhead budget report for the quarter. (Marks 8)

(b) Which items from the budget report would be included in a responsibility report prepared for the production department manager? (Marks 2)

Answer Format

(a)

Flexible budget

Actual

Variance

F/U

(b)

(b)