A static budget:
a. Is based totally on the prior year's costs.
b. Is based on one anticipated activity level.
c.Is based on a range of activities. Is preferred over a flexible budget in the evaluation of performance.
d. Presents a clear measure of performance when planned activity differs from actual activity.
A static budget:
a. Is based totally on the prior year's costs.
b. Is based on one anticipated activity level.
c.Is based on a range of activities. Is preferred over a flexible budget in the evaluation of performance.
d. Presents a clear measure of performance when planned activity differs from actual activity.
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JHF Packaging manufactures and sells a wide variety of packaging products. The planning (static) budget and flexible budget for the Production Department are based on the following formulas, where Q is the number of direct labor-hours worked in a month:
Direct Labor | $16.30Q |
Supplies | $1.40Q |
Indirect Labor | $4,300 + $15.10Q |
Utilities | $5,600 + $0.70Q |
Equipment depreciation | $29,800 |
Factory rent | $8,300 |
Property insurance | $2,800 |
The acutal costs incurred in April in the Production Department are listed below:
Direct Labor | $63,250 |
Supplies | $5,710 |
Indirect Labor | $61,230 |
Utilities | $8,790 |
Equipment Depreciation | $29,800 |
Factory Rent | $8,300 |
Property Insurance | $2,400 |
The company had budgeted for an activity level for 4,000 direct labor-hours in April, but actually only worked 3,800 direct labor-hours.
Required:
Prepare the Production Department's flexible budget performance report for April, including both activity and spending variances.