Posted: July 17th, 2016

What is an over budget?

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 (see attached for better formatting)

Variable manufacturing costs:
Direct materials $ 30.00
Direct labor 48.00
Indirect labor 15.00
Indirect materials, supplies, etc. 9.00
Total variable manufacturing costs $ 102.00

Fixed manufacturing costs:
Lease rental $ 9.00
Salaries of foremen 24.00
Depreciation and other 15.00

Flexible Budget

Variable manufacturing costs:
Direct materials $ 150,000
Direct labor 240,000
Indirect labor 75,000
Indirect materials, supplies, etc. 45,000
Total variable manufacturing costs $ 510,000

Fixed manufacturing costs:
Lease rental $ 45,000
Salaries of foremen 120,000
Depreciation and other 75,000

Actual Costs Incurred

Variable manufacturing costs:
Direct materials $ 171,000
Direct labor 261,500
Indirect labor 95,500
Indirect materials, supplies, etc. 48,400
Total variable manufacturing costs $ 576,400

Fixed manufacturing costs:
Lease rental $ 45,000
Salaries of foremen 125,000
Depreciation and other 78,600

Over (Under) Budget

Variable manufacturing costs:
Direct materials $ 21,000
Direct labor 21,500
Indirect labor 20,500
Indirect materials, supplies, etc. 3,400
Total variable manufacturing costs $ 66,400