Explain the development of flexible budgets and the usefulness of flexible budge

Question

Explain the development of flexible budgets and the usefulness of flexible budget reports Brief Exercise 21-4 Gundy Company expects to produce 1,294,800 units of Product XX in 2012. Monthly production is expected to range from 84,350 to 126,770 units. Budgeted variable manufacturing costs per unit are: direct materials $5, direct labor $7, and overhead $10. Budgeted fixed manufacturing costs per unit for depreciation are $5 and for supervision are $2. Prepare a flexible manufacturing budget for the relevant range value using 21,210 unit increments. (List variable costs before fixed costs.) GUNDY COMPANY Monthly Flexible Manufacturing Budget For the Year 2012 $ $ $ $ $ $ $ $ $

Explanation / Answer

Lexible Manufacturing Budget No of Units 1294800 Production 84350 to 126770 Units 21210 Direct Material 5 106050 Direct Labour 7 148470 Overheads 10 212100 Total 22 466620 Depreciation 5 106050 Superision 2 42420 Total 29 615090 Total Gain 21210*29 615090

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