Jael Equipment uses a flexible budget for its indirect manufacturing costs.For 2015 the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days.The costs and cost drivers were to be as follows:

During the year,the company processed 20,000 units;worked 7,500 employee days;and,had 4,000 machine hours.The actual costs for 2015 were:

Required:
a.Prepare the static-budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible-budget using the overhead items above and then compute the flexible-budget variances.

Question

Jael Equipment uses a flexible budget for its indirect manufacturing costs.For 2015 the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days.The costs and cost drivers were to be as follows:
  
During the year,the company processed 20,000 units;worked 7,500 employee days;and,had 4,000 machine hours.The actual costs for 2015 were:
  
Required:
a.Prepare the static-budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible-budget using the overhead items above and then compute the flexible-budget variances.

Quizplus · Accepted Answer

The Answer of Jael Equipment uses a flexible budget for its indirect manufacturing costs.For 2015 the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days.The costs and cost drivers were to be as follows:
  
During the year,the company processed 20,000 units;worked 7,500 employee days;and,had 4,000 machine hours.The actual costs for 2015 were:
  
Required:
a.Prepare the static-budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible-budget using the overhead items above and then compute the flexible-budget variances.

Jael Equipment Uses a Flexible Budget for Its Indirect Manufacturing