Braemar Saddlery uses department budgets and performance reports in planning and
ID: 2428332 • Letter: B
Question
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
Per Unit
Total
Actual
Costs
Incurred
Over
(Under)
Budget
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 $75,000, the president said to the accountant: "Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs."
Instructions
a.
Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles.
b.
What is the amount of over- or underapplied manufacturing overhead for the year? (Note that a standard cost system is not used.)
(Omit the "$" sign in your response. Do not place a minus sign in front of amounts to be subtracted.)
a.
BRAEMAR SADDLERY
Performance Report for Custom Saddle Production Dept.
For the Year Ended December 31, 20__
Budgeted Costs
for 6,000 Units
Actual
Costs
Incurred
Over
(Under)
Budget
Per Unit
Total
Variable manufacturing costs:
Direct materials
$
$
$
$()
Direct labor
()
Indirect labor
Indirect materials, supplies, etc.
()
Total variable manufacturing costs
$
$
$
$()
Fixed manufacturing costs:
Lease rental
$
$
$
$
Salaries of foremen
Depreciation and other
Total fixed manufacturing costs
$
$
$
$
Total manufacturing costs
$
$
$
$()
b.
Manufacturing overhead incurred:
Indirect labor
$
Indirect materials, supplies, etc.
Total fixed manufacturing costs
Total manufacturing overhead incurred
$
Manufacturing overhead applied, 150% of $261,500 (direct labor)
Underapplied manufacturing overhead
$
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:
Explanation / Answer
Nice job this was correct