PROBLEM 23.8B Flexible Budgeting LO23-2, LO23-4, LO23-5, LO23-6 XL Industries uses department budgets and performance reports in planning and controlling its manufacturing operations. The following annual performance report for the widget production department was presented to the president of the company. Variable manufacturing costs: Budgeted Costs for 4,000 Units Actual Costs Over (Under) Per Unit Total Incurred Budget Direct materials Direct labor $ 25.00 $100,000 $120,000 $20,000 50.00 200,000 210,000 10,000 Indirect labor 12.00 48,000 50,000 2,000 Indirect materials, supplies, etc. 10.00 40,000 43,000 3,000 Total variable manufacturing costs $ 97.00 $388.000 $423,000 $35,000 Fixed manufacturing costs: Lease rental $ 10.00 $ 40,000 $ 40,000 -0- Salaries of foremen 25.00 Depreciation and other 18.00 100,000 72,000 104,000 75,000 $ 4,000 3,000 Total fixed manufacturing costs $ 53.00 $212,000 $219,000 Total manufacturing costs $150.00 $600,000 $642,000 $ 7,000 $42,000 Although a production volume of 4,000 widgets was originally budgeted for the year, the actual volume of production achieved Page 1042 for the year was 5,000 widgets. Direct materials and direct labor are charged to production at actual costs. 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 $42,000, 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." Instructions a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report given, but revise the budgeted cost figures to reflect the actual production level of 5,000 widgets. b. Briefly comment on XL's ability to control its variable manufacturing costs. c. What is the amount of over- or underapplied manufacturing overhead for the year?