The primary difference between a static budget and a flexible budget is that a static budget
a. The static budget contains only fixed costs, while the flexible budget contains only variable costs.
b. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.
c. The flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels.
d. The static budget is constructed using input from only upper-level management, while a flexible budget obtains input from all levels of management.
e. The flexible budget is constructed using input from only upper-level management, while a static budget obtains input from all levels of management.
The primary difference between a static budget and a flexible budget is that a static budget
a. The static budget contains only fixed costs, while the flexible budget contains only variable costs.
b. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.
c. The flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels.
d. The static budget is constructed using input from only upper-level management, while a flexible budget obtains input from all levels of management.
e. The flexible budget is constructed using input from only upper-level management, while a static budget obtains input from all levels of management.
Related questions
Bill Graham and Larry Miller incorporated B&L LandscapesInc. on July 1, 2014. The business consists of lawn care andsprinkler system installations. In addition, they also sell twotypes of fertilizer. During 2015 B&L Landsaces Inc. accuired a30% interest in Crestline Pipe. The president of Crestline wants todevelop a management report to evaluate Manufacturing Overheadcosts. Bill and Larry want to help and have volunteered yourservices to provide some managerial reporting for Crestline.Crestline Pipe distributes high-quality PVC pipe and has thefollowing information for the month of march 2015:
Crestline Pipe
Maufacturing Overhead Budget (Static)
For the Month of March, 2015
| Budgeted production in LF | 117,500 |
| Budgeted costs | |
| Indirect materials ($0.30/DLH) | 7,050 |
| Indirect labor ($0.50/DLH) | 11,750 |
| Utilities ($0.40/DLH) | 9,400 |
| Maintenance ($0.25/DLH) | 5,875 |
| Salaries | 42,000 |
| Depreciation | 16,800 |
| Property taxes | 2,500 |
| Insurance | 1,200 |
| Janitorial | 1,300 |
| Total budgeted costs | 97,875 |
Crestline Pipe
Manufacturing Overhead Costs (Actual)
For the Month of March, 2015
| Actual production in LF | 118,500 |
| Actual costs | |
| Indirect materials | 7,100 |
| Indirect labor | 11,825 |
| Utilities | 10,700 |
| Maintenance | 5,900 |
| Salaries | 42,000 |
| Depreciation | 16,800 |
| Property Taxes | 2,500 |
| Insurance | 1,200 |
| Janitorial | 1,300 |
| Total budgeted costs | 99,325 |
Cresline Pipe had the following static budget and overhead costsfor March. Manufacturing overhead is budgeted based on direct laborhours (DLH). Direct labor is budgeted at 12 minutes per linear foot(LF).
Instructions:
1. Prepare a flexible manufacturing overhead budget based on thefollowing amounts produced.
a) 115,500 LF
b) 116,500 LF
c) 117,500 LF
d) 118,500 LF
e) 119,500 LF
2. Prepare a flexible budget report showing the differences(favorable and unfavorable) in manufaturing overhead costs for themonth of March. Include your analysis of what varianecs should beinvestigated further.
3. Prepare a responsibility report for the manufacturingoverhead for March, assuming only variable costs are controllable.Provide a brieg evaluation of how this information could be used tomeasure the maufacturing manager's performance.
Consider the following information from Grantham Company,then see the instructions that | ||||||||
follow. | ||||||||
Grantham Company manufactures dog whistles. The followinginformation is available from | ||||||||
the budgetary control system for 2016, and was used to createthe master budget. Grantham | ||||||||
applies overhead using an activity index of direct laborhours. | ||||||||
Variable Costs | Rate per direct labor hour | |||||||
Indirect labor | $0.52 | |||||||
Indirect materials | 0.36 | |||||||
Factory utilities | 0.88 | |||||||
Factory repairs | 0.48 | |||||||
Fixed Costs | Amount per year | |||||||
Depreciation | $25,300 | |||||||
Insurance | 9,300 | |||||||
Property taxes | 5,800 | |||||||
Supervision | 61,500 | |||||||
The master overhead budget was prepared with the expectationthat 462,000 direct labor | ||||||||
hours would be worked during the year. In August, 39,500 directlabor hours were worked. | ||||||||
At that level of activity, actual costs were as shown below: | ||||||||
Variable Costs | ||||||||
Indirect labor | $0.54 | per labor hour | ||||||
Indirect materials | 0.34 | per labor hour | ||||||
Factory utilities | 0.91 | per labor hour | ||||||
Factory repairs | 0.53 | per labor hour | ||||||
Fixed Costs | ||||||||
Depreciation | $2,108 | |||||||
Insurance | 825 | |||||||
Property taxes | 500 | |||||||
Supervision | 5,250 | |||||||
Instructions: | ||||||||
Prepare a monthly manufacturing overhead flexible budget,assuming production levels | ||||||||
ranging from 30,000 to 45,000 direct labor hours, in incrementsof 5,000. | ||||||||
Prepare a budget report for August comparing actual results tothe flexible budget. Explain | ||||||||
whether costs were successfully controlled and how you cantell. | ||||||||
THIS ASSIGNMENT MUST BE COMPLETED IN EXCEL. You should developan efficient and | ||||||||
customizable production cost report, using formulas wheneverpossible instead of keyed in | ||||||||
values. No numeric values except the ones shown above shouldneed to be keyed in. | ||||||||
