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Flexible Budget In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible...

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Accounting

Flexible Budget

In an attempt to improve budgeting, the controller for Meliore,Inc., has developed a flexible budget for overhead costs. Meliore,Inc., makes two types of products, the standard model and thedeluxe model. Meliore expects to produce 300,000 units of thestandard model and 120,000 units of the deluxe model during thecoming year. The standard model requires 0.05 direct labor hour perunit, and the deluxe model requires 0.08. The controller hasdeveloped the following cost formulas for each of the four overheaditems:

CostFormula          
Maintenance$34,600 + $1.25 DLH
Power$0.50 DLH
Indirect labor$68,200 + $2.30 DLH
Rent$31,700

At the end of the year, Meliore, Inc., actually produced 310,000units of the standard model and 115,000 of the deluxe model. Theactual overhead costs incurred were:

Maintenance$ 64,200
Power12,410
Indirect labor129,160
Rent31,700

Required:

Prepare a performance report for the period. If there is novariance, enter "0" for the amount and select "NA" in the lastcolumn.

Meliore, Inc.
Performance Report
For the Year Ended December 31
ActualBudgetVarianceFav/Unfav/NA
DLH for units produced
Production costs:
Maintenance$$$
Power
Indirect labor
Rent
Total$$$  

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Meliore Inc.
Performance Report
For the year ended December 31
Actual results Budget Variance
(i) (ii)
DLH for unit produced                                                         24,700        24,700
Production costs:
Maintenance $                                                     64,200        65,475 $    1,275 F
Power $                                                     12,410        12,350 $          60 U
Indirect labor $                                                 1,29,160     1,25,010 $    4,150 U
Rent $                                                     31,700        31,700 $           0 NA
Total $                                                 2,37,470     2,34,535 $    2,935 U
Workings: Budget
DLH for unit produced [(310000 X 0.05) + (115000 X 0.08)]        24,700
Production costs:
Maintenance [$34600 + ($1.25 X q)]        65,475
Power ($0.50 X q)        12,350
Indirect labor [$68200 + ($2.30 X q)]     1,25,010
Rent $                                                     31,700        31,700
Total     2,34,535

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