Phillips Company prepared the following performance report for September. Philli
ID: 2453204 • Letter: P
Question
Phillips Company prepared the following performance report for September. Phillips would like you to prepare the flexible budget and help them understand the results of operations.
Actual Master
Results Budget
Sales volume (in units) 60,000 56,000
Manufacturing costs:
Direct materials $285,000 $252,000
Direct labor $94,000 $89,600
Variable overhead 120,000 126,000
Fixed manufacturing suppot 310,000 299,600
Total $ 809,000 $ 767,200
Required:
Prepare the flexible budget for Cutler Ridge based on the information provided above. Calculate the flexible budget variances for each cost item as well as the total variance. Indicate whether the variances are favorable or unfavorable.
Which variances require the attention of management? Explain.
Explanation / Answer
Particulars Master Actual Flexible Variances Favourable/Unfavourable Sales 56000 60000 60000 Manufacturing Costs Direct Materials 252000 285000 270000 -15000 unfavourable Direct Labor 89600 94000 96000 2000 Favourable Variable Overhead 126000 120000 135000 15000 Favourable Fixed Manufacturing 299600 310000 299600 -10400 unfavourable