CD10 Prepare flexible manufacturing overhead budget The Current Designs staff ha
ID: 2572856 • Letter: C
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CD10 Prepare flexible manufacturing overhead budget The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,000 kayaks during 2017. Each kayak will require 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kit cost $170 each. Each kayak will use two kinds of labor - 2 hours of type I labor from people who run the oven and trim the plastic, and 3 hours of work from type II workers who attach the hatches and seat and other hardware. The type I employees are paid $15 per hour, and the type II are paid $12 per hour. Manufacturing overhead is budgeted at $396,000 for 2017, broken down as follows. Variable costs Indirect materials $40,000 Manufacturing supplies 53,800 Maintenance and utilities 88,000 181,800 Fixed costs Supervision 90,000 Insurance 14,400 Depreciation 109,800 214,200 Total $396,000 During the first quarter, ended March 31, 2017, 1,050 units were actually produced with the following costs. Polyethylene powder $87,000 Finishing kits 178,840 Type I labor 31,500 Type II labor 39,060 Indirect materials 10,500 Manufacturing supplies 14,150 Maintenance and utilities 26,000 Supervision 20,000 Insurance 3,600 Depreciation 27,450 Total $438,100 Instructions (a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced. (b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume activity levels of 900, 1,000 and 1,050 units. (c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for manufacturing for the quarter ended March 31, 2017, when 1,050 units were produced. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . After you have completed CD10 consider the following additional questions. 1. Assume that the activity levels in the flexible budget for the quarter ended March 31, 2017 changed to 900, 1,000 and 1,200 in part (b). Show the impact of this change on the flexible budget. 2. Assuming the rotomolded line is treated as a profit center, revise the flexible budget report for manufacturing for the quarter ended March 31, 2017, assuming 1,200 units were produced. Assume that variable costs were 10% higher at this level of activity. CD10 Prepare flexible manufacturing overhead budget The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,000 kayaks during 2017. Each kayak will require 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kit cost $170 each. Each kayak will use two kinds of labor - 2 hours of type I labor from people who run the oven and trim the plastic, and 3 hours of work from type II workers who attach the hatches and seat and other hardware. The type I employees are paid $15 per hour, and the type II are paid $12 per hour. Manufacturing overhead is budgeted at $396,000 for 2017, broken down as follows. Variable costs Indirect materials $40,000 Manufacturing supplies 53,800 Maintenance and utilities 88,000 181,800 Fixed costs Supervision 90,000 Insurance 14,400 Depreciation 109,800 214,200 Total $396,000 During the first quarter, ended March 31, 2017, 1,050 units were actually produced with the following costs. Polyethylene powder $87,000 Finishing kits 178,840 Type I labor 31,500 Type II labor 39,060 Indirect materials 10,500 Manufacturing supplies 14,150 Maintenance and utilities 26,000 Supervision 20,000 Insurance 3,600 Depreciation 27,450 Total $438,100 Instructions (a) Prepare the annual manufacturing budget for 2017, assuming that 4,000 kayaks will be produced. (b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2017. Assume activity levels of 900, 1,000 and 1,050 units. (c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for manufacturing for the quarter ended March 31, 2017, when 1,050 units were produced. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .Explanation / Answer
ans 1 Manufacturing Budget Units to be produced Cost 4000 working Cost Variable cost Polyethylene powder 4000*1.5*54 324000 Finishing kits 4000*170 680000 Type I labor 4000*2*15 120000 Type II labor 4000*3*12 144000 Indirect materials 40000 Manufacturing supplies 53800 Maintenance and utilities 88000 Total variable cost 1449800 Fixed cost Supervision 90000 Insurance 14400 Depreciation 214200 Total Fixed cost 318600 Total cost 1768400 ans 2 Flexible Budget 900 1000 1050 Cost Variable cost Polyethylene powder 72900 81000 85050 Finishing kits 153000 170000 178500 Type I labor 27000 30000 31500 Type II labor 32400 36000 37800 Indirect materials 9000 10000 10500 Manufacturing supplies 12105 13450 14122.5 Maintenance and utilities 19800 22000 23100 Total variable cost 326205 362450 380573 Fixed cost (per qtr) Supervision 22500 22500 22500 Insurance 3600 3600 3600 Depreciation 53550 53550 53550 Total Fixed cost 79650 79650 79650 Total cost 405855 442100 460223 4000 VariableCost per kayak Total cost working Cost Variable cost Polyethylene powder 4000*1.5*54 324000 81 Finishing kits 4000*170 680000 170 Type I labor 4000*2*15 120000 30 Type II labor 4000*3*12 144000 36 Indirect materials 40000 10 Manufacturing supplies 53800 13.45 Maintenance and utilities 88000 22 ans c Flexible Budget Report Flexible Actual Varaince Cost Variable cost Polyethylene powder 85050 $87,000 $1,950 U Finishing kits 178500 178,840 $340 U Type I labor 31500 31,500 $0 None Type II labor 37800 39,060 $1,260 U Indirect materials 10500 10,500 $0 None Manufacturing supplies 14123 14,150 $28 U Maintenance and utilities 23100 26,000 $2,900 U Total variable cost 380573 $387,050 $6,478 U Fixed cost Supervision 22500 20,000 $2,500 F Insurance 3600 3,600 $0 None Depreciation 53550 27,450 $26,100 F Total Fixed cost 79650 51050 $28,600 F Total cost 460223 438100 $22,123 F additional Flexible Budget 900 1000 1200 Cost Variable cost Polyethylene powder 72900 81000 97200 Finishing kits 153000 170000 204000 Type I labor 27000 30000 36000 Type II labor 32400 36000 43200 Indirect materials 9000 10000 12000 Manufacturing supplies 12105 13450 16140 Maintenance and utilities 19800 22000 26400 Total variable cost 326205 362450 434940 Fixed cost Supervision 22500 22500 22500 Insurance 3600 3600 3600 Depreciation 53550 53550 53550 Total Fixed cost 79650 79650 79650 Total cost 405855 442100 514590 ans c Flexible Budget Report Flexible Actual Varaince Cost Variable cost Polyethylene powder 97200 $87,000 $10,200 U Finishing kits 204000 178,840 $25,160 U Type I labor 36000 31,500 $4,500 U Type II labor 43200 39,060 $4,140 U Indirect materials 12000 10,500 $1,500 U Manufacturing supplies 16140 14,150 $1,990 U Maintenance and utilities 26400 26,000 $400 U Total variable cost 434940 $387,050 $47,890 U Fixed cost Supervision 22500 20,000 $2,500 F Insurance 3600 3,600 $0 None Depreciation 53550 27,450 $26,100 F Total Fixed cost 79650 51050 $28,600 F Total cost 514590 438100 $76,490 F
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