Flexible Budgeting in Assembly Department
Coop Company assembles all of its products in the Assembly Department (what a surprise!). Budgeted
costs for this department for the year are shown below:
Variable costs:
Direct materials				$ 900,000
Direct labor				675,000
Utilities				45,000
Indirect labor				67,500
Supplies				22,500
Total variable cost				1,710,000
Fixed costs:
Insurance				8,000
Supervisory salaries				90,000
Depreciation				160,000
Equipment rental				42,000
Total fixed cost				300,000
Total budgeted cost				$ 2,010,000
Budgeted direct labor hours				75,000
Since the assembly work is done mostly by hand, operating activity in this department is best measured
by direct labor-hours.
Required:
1) Prepare an assembly department flexible budget in increments of 60,000, 75,000, and 90,000
direct labor hours.
2) Suppose actual costs for the assembly department were as shown below. Further, 73,000
labor hours were actually worked. Prepare a flexible budget performance report showing
the over and under budget amount for each of the costs.
Variable costs:
Direct materials				940,000
Direct labor				678,000
Utilities				55,000
Indirect labor				48,360
Supplies				26,000
Total variable cost				1,747,360
Fixed costs:
Insurance				5,960
Supervisory salaries				82,650
Depreciation				192,366
Equipment rental				40,690
Total fixed cost				321,666