Fixed manufacturing costs:
Lease rental $ 0
Salaries of foremen $ 5,000
Depreciation and other 3,600
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 $75,000, the president said to the accountant: “Fix this thing so it makes sense. It looks as though our production people really blew the budget. Remember that we exceeded our budgeted production schedule by a significant margin. I want this performance report to show a better picture of our ability to control costs.”
a. Prepare a revised performance report for the year on a flexible budget basis. Use the same format as the production report above, but revise the budgeted cost figures to reflect the actual production level of 6,000 saddles. (Leave no cells blank – be certain to enter “0” wherever required. Under-budget amounts should be indicated with a minus sign. Round your per unit answers to 1 decimal place. Omit the “$” sign in your response.)
b. What is the amount of over- or underapplied manufacturing overhead for the year? (Note that a standard cost system is not used.)
Manufacturing overhead applied $
Underapplied manufacturing overhead $
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