1. Gundy Company expects to produce 1,200,000 units of product XX. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct materials $5, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit are depreciation $2 and supervision $1.

In March, the company incurs the following actual costs in producing 100,000 units of XX: direct materials $525,000, direct labor $596,000, and variable overhead $805,000. Actual fixed costs in March were equal to budgeted fixed costs.

Use the template below to complete the manufacturing flexible budget report including calculating the flexible budget variances. Indicate whether each variance is favorable or unfavorable. If you had to select one variance to investigate further, which one would you select?

GUNDY COMPANY

Manufacturing Flexible Budget Report

For the Month Ended March 31, 2014

			Budget		Actual		Difference
	Units produced Variable costs Direct materials Direct labor Overhead Total variable costs Fixed costs Depreciation Supervision Total fixed costs Total costs		100,000		100,000		Favorable F Unfavorable U

Variance to investigate further. _______________________________________________________