Prepare a performance report for Eastend's manufacturing costs in $2020.$

$2.$ Assume that one of the products produced by Eastend is budgeted to use $10,000$ direct labour hours, $15,000$ machine hours, and $500$ moves and will be produced in five batches. A total of $10,000$ units will be produced during the year. Calculate the budgeted unit manufacturing cost.

$3.$ One of Eastend's managers said the following: "Budgeting at the activity level makes a lot' of sense. It really helps us manage costs better. But this budget really needs to provide more detailed information. For example, I know that the materials handling activity involves the usage of forklifts and operators, and this information is lost with simply reporting the total cost of the activity for various levels of output. We have four forklifts, each capable of providing $10,000$ moves per year. We lease these forklifts for five years, at $$10,000$ per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of $$30,000$ per year. Also, I know that fuel costs us about $$0\mathrm{.}25$ per move."

$4.$ Based on these comments, explain how this additional information may help Eastend to better manage its costs. Also, assuming that these are the only three items, expand the detail of the flexible budget for materials handling to reveal the cost of these three resource items for $20,000$ moves and $40,000$ moves, respectively.

$5.$ Using a flexible budget, prepare a performance report comparing expected costs for the actual production with actual costs.

$6.$ Determine the following:

a$.$ Fixed overhead spending and volume variances.

b$.$ Variable overhead spending and efficiency variances.

QUESTION ONE

Gordon Brown, comptroller for Eastend Inc., prepared the following budget for manufacturing costs at two different levels of activity for $2020$:

DIRECT LABOUR HOURS

Level of Activity

$50,000100,000$

Direct Materials $$300,000$ $$600,000$

Direct Labour $200,000400,000$

Depreciation $($plant$)100,000100,000$

Subtotal $$600,000$ $$1,100,000$

MACHINE HOURS

Level of Activity

$200,000300,000$

Maintaining equipment $ $360,000$ $ $510,000$

Machining $112,000162,000$

Subtotal $ $472,000$ $ $672,000$

MATERIAL MOVES

Level of Activity

$20,00040,000$

MateAssignment Tasks:

$1.$ Prepare a performance report for Eastend's manufacturing cosrials handling $$165,000$ $$290,000$

NUMBER OF BATCHES INSPECTED

Level of Activity

$100200$

Inspecting products $ $125,000$ $ $225,000$

Total $$1,362,000$ $$2,287,000$

During $2019,$ Eastend employees worked a total of $80,000$ direct labour hours, used $250,000$ machine hours, made $32,000$ moves, and performed $120$ batch inspections.

The following actual costs were incurred:

Direct materials $$440,000$

Direct labour $355,000$

Depreciation $100,000$

Maintenance $425,000$

Machining $142,000$

Materials handling $232,500$

Inspecting products $160,000$

Eastend applies overhead using rates based on direct labour hours, machine hours, number of moves, and number of batches. The second level of activity $($the far right column in the preceding table$)$ is the practical level of activity $($the available activity for resources acquired in advance of usage$)$ and is used to compute predetermined overhead pool rates.

Required:

$1.$ Prepare a performance report for Eastend's manufacturing costs in $2020.4$ Marks

$2.$ Assume that one of the products produced by Eastend is budgeted to use $10,000$ direct labour hours, $15,000$ machine hours, and $500$ moves and will be produced in five batches. A total of $10,000$ units will be produced during the year. Calculate the budgeted unit manufacturing cost. $3$ Marks

$3.$ One of Eastend's managers said the following: "Budgeting at the activity level makes a lot' of sense. It really helps us manage costs better. But this budget really needs to provide more detailed information. For example, I know that the materials handling activity involves the usage of forklifts and operators, and this information is lost with simply reporting the total cost of the activity for various levels of output. We have four forklifts, each capable of providing $10,000$ moves per year. We lease these forklifts for five years, at $$10,000$ per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of $$30,000$ per year. Also, I know that fuel costs us about $$0\mathrm{.}25$ per move."

Based on these comments, explain how this additional information may help Eastend to better manage its costs. Also, assuming that these are the only three items, expand the detail of the flexible budget for materials handling to reveal the cost of these three resource items for $20,000$ moves and $40,000$ moves, respectively. You may wish to review the concepts of flexible, committed, and discretionary resources foundI