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Problem 23.8A Flexible Budgeting (LO23-2, LO23-4, LO23-5, LO23-6) Braemar Saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. The following

Problem 23.8A Flexible Budgeting (LO23-2, LO23-4, LO23-5, LO23-6)

Braemar Saddlery uses department budgets and performance reports in planning and controlling its manufacturing operations. The following annual performance report for the custom saddle production department was presented to the president of the company.

Budgeted Costs for 5,000 Units Actual Costs Incurred Over (Under) Budget
Per Unit Total
Variable manufacturing costs:
Direct materials $ 30.00 $ 150,000 $ 171,000 $ 21,000
Direct labor 48.00 240,000 261,500 21,500
Indirect labor 15.00 75,000 95,500 20,500
Indirect materials, supplies, etc. 9.00 45,000 48,400 3,400
Total variable manufacturing costs $ 102.00 $ 510,000 $ 576,400 $ 66,400
Fixed manufacturing costs:
Lease rental $ 9.00 $ 45,000 $ 45,000 $ 0
Salaries of foremen 24.00 120,000 125,000 5,000
Depreciation and other 15.00 75,000 78,600 3,600
Total fixed manufacturing costs $ 48.00 $ 240,000 $ 248,600 $ 8,600
Total manufacturing costs $ 150.00 $ 750,000 $ 825,000 $ 75,000

Although a production volume of 5,000 saddles was originally budgeted for the year, the actual volume of production achieved for the year was 6,000 saddles. Direct materials and direct labor are charged to production at actual cost. Factory overhead is applied to production at the predetermined rate of 150 percent of the actual direct labor cost.

After a quick glance at the performance report showing an unfavorable manufacturing cost variance of $75,000, the president said to the accountant: Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs.

Required: a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles.

c. What is the amount of over- or underapplied manufacturing overhead for the year?

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