Santini Corporation\'s budget for the first quarter of the year includes the fol

Question

Santini Corporation's budget for the first quarter of the year includes the following: Planned Unit Sales 10.000 Sales $1,000,000 Fixed manufacturing costs: Salaries Utilities Factory Rent Maintenance/other Total fixed manufacturing costs S95,000 7,500 45,000 9.500 $157,000 Variable manufacturing costs: Direct materials Direct labor Other Total variable manufacturing costs S300,000 250,000 S650,000 Actual results for the first quarter were as follows: Actual Unit Sales Sales 8.000 $800,000 Fixed manufacturing costs: Salaries Utilities Factory Rent 95,000 7,500 45,000 2.500 Total fixed manufacturing costs S157,000 Variable manufacturing costs: Direct materials Direct labor Other Total variable manufacturing costs $250,000 232,500 95.000 S577,500 The plant manager believes he is due a bonus, as actual variable manufacturing costs were much lower than the budget. Required 1. Prepare a flexible budget for sales at actual levels. 2. Respond to the plant manager's request in a memo.

Explanation / Answer

U stands for unfavorable variance.

Please note all values are in $.

In case of any clarification requried please comment.

particualrs planned Planned Per unit Flexible Actual Flexible budget variance variance Output 10000 8000 8000 Sales 1000000 100 800000 800000 0 variable manufacturing cost Direct material 300000 30 240000 250000 -10000 U Direct labor 250000 25 200000 232500 -32500 U other 100000 10 80000 95000 -15000 U total variable cost 650000 65 520000 577500 -57500 U fixed manufacturing cost salaries 95000 9.5 95000 95000 0 utilities 7500 0.75 7500 7500 0 Factory rent 45000 4.5 45000 45000 0 maintinance & others 9500 0.95 9500 9500 0 total fixed manufacturing 157000 15.7 157000 157000 0

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