Flexible budget. Connor Company’s budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attaché case are $40, $8, and $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 |
Actual output was 8,800 attaché cases. Assume all three direct cost items shown are variable costs.
Is the president’s pleasure justified? Prepare a revised performance report that uses a flexible budget and a static budget.