Flexible Budget
Connor Company’s budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attache case are $40, $8, $12, respectively. The president is pleased with the following performance report.
|
Actual Costs |
Static Budget |
Variance |
|
|
Direct materials |
364,000 |
400,000 |
36,000 F |
|
Direct manufacturing labor |
78,000 |
80,000 |
2,000 F |
|
Direct marketing (distribution)labor |
110,000 |
120,000 |
10,000 F |
48,000 F
Actual output was 8,800 attache cases. Assume all three direct-cost items above are variable costs.
Is the president’s pleasure justified? Prepare revised performance report that uses flexible budget and a static budget.