Flexible Budget

In an attempt to improve budgeting, the controller for Engersol, Inc., has developed a flexible budget for overhead costs. Engersol, Inc., makes two types of products, commercial floor cleaners and household floor cleaners. The company expects to produce 300,000 units of the commercial cleaner and 120,000 units of the household cleaner during the coming year. The commercial cleaner requires 0.04 direct labor hour per unit, and the household cleaner requires 0.06. The controller has developed the following cost formulas for each of the four overhead items:

	Cost Formula
Maintenance	$34,600 + $1.25 DLH
Power	$0.50 DLH
Indirect labor	$68,500 + $2.30 DLH
Rent	$31,100

At the end of the year, Engersol, Inc., actually produced 310,000 units of the commercial cleaner and 115,000 of the deluxe model. The actual overhead costs incurred were:

Maintenance	$ 57,500
Power	9,710
Indirect labor	117,140
Rent	31,100

Required:

Prepare a performance report for the period. If there is no variance, enter "0" for the amount and select "NA" in the last column.

Engersol, Inc. Performance Report For the Year Ended December 31

	Actual	Budget	Variance
DLH for units produced	NA	NA	NA	FavorableUnfavorableNANA
Production costs:
Indirect laborMaintenancePowerRentMaintenance	$Favorable	$Favorable	$Favorable	FavorableUnfavorableNAFavorable
Indirect laborMaintenancePowerRentPower	Unfavorable	Unfavorable	Unfavorable	FavorableUnfavorableNAUnfavorable
Indirect laborMaintenancePowerRentIndirect labor	Unfavorable	Unfavorable	Unfavorable	FavorableUnfavorableNAUnfavorable
Indirect laborMaintenancePowerRentRent	NA	NA	NA	FavorableUnfavorableNANA
Total	$Unfavorable	$Unfavorable	$Unfavorable	FavorableUnfavorableNAUnfavorable