Jim’s Landscaping is in a business of maintaining and improving yards in the surrounding areas. The company bases its overhead cost budgets on the following data: Variable overhead costs: Supplies $4 per yard Machine maintenance $2 per yard Chemicals $6 per yard Fixed Overhead: Salaries and wages $2,300 per month Depreciation $800 per month Utilities $400 per month Rent $1,100 per month In June the following actual costs were incurred for 83 yards: Supplies $320 Machine maintenance $180 Chemicals $500 Salaries and wages $2,500 Depreciation $800 Utilities $450 Rent $1,100 Construct a flexible budget performance report using the data provided: Show computations
Jim's Landscaping is the business of maintaining and improving yards in surrounding areas. The company bases its overhead cost budgets on the following data
Variable overhead costs:
Supplies $4 per yard
Machine maintenance $2 per yard
Chemicals $6 per yard
Fixed overhead costs:
Salaries and wages $2300 per month
Machine maintenance $800 per month
Utilities $400 per month
Rent $1100 per month
In June, the following actual costs were incurred for 83 yards:
Supplies $320
Machine maintenance $180
Chemicals $500
Salaries and wages $2500
Depreciation $800
Utilities $450
Rent $1100
Variable cost per unit
12
Fixed overhead cost
Salaries and wages
2300
Machine maintenance
800
Utilities
400
Rent
1100
Total
4600
So overhead applied
Variable = 83*12
996
Fixed
4600
Total overhead applied
5596
Actual cost incurred
Supplies
320
Machine maintenance
180
Chemicals
500
Salaries and wages
2500
Depreciation
800
Utilities
450
Rent
1100
Actual cost incurred
5850
To construct a flexible budget performance report, we need to compare the actual costs incurred in June to the budgeted costs based on the given data.
Let's begin by calculating the budgeted costs for the 83 yards based on the overhead cost data provided.
Variable overhead costs:
Supplies: $4 per yard x 83 yards = $332
Machine maintenance: $2 per yard x 83 yards = $166
Chemicals: $6 per yard x 83 yards = $498
Fixed overhead costs:
Salaries and wages: $2,300 per month
Depreciation: $800 per month
Utilities: $400 per month
Rent: $1,100 per month
Now, let's calculate the total flexible budget.
Variable overhead costs:
Supplies: $332
Machine maintenance: $166
Chemicals: $498
Fixed overhead costs:
Salaries and wages: $2,300
Depreciation: $800
Utilities: $400
Rent: $1,100
Total flexible budget = Total variable overhead costs + Total fixed overhead costs
Total variable overhead costs = $332 + $166 + $498 = $996
Total fixed overhead costs = $2,300 + $800 + $400 + $1,100 = $4,600
Total flexible budget = $996 + $4,600 = $5,596
Now, we can construct the flexible budget performance report by comparing the actual costs incurred to the flexible budget.
Actual costs incurred in June:
Supplies: $320
Machine maintenance: $180
Chemicals: $500
Salaries and wages: $2,500
Depreciation: $800
Utilities: $450
Rent: $1,100
Flexible budget costs:
Supplies: $332
Machine maintenance: $166
Chemicals: $498
Salaries and wages: $2,300
Depreciation: $800
Utilities: $400
Rent: $1,100
To calculate the variances, subtract the flexible budget costs from the actual costs incurred:
Supplies variance = Actual supplies cost - Flexible budget supplies cost = $320 - $332 = -$12
Machine maintenance variance = Actual machine maintenance cost - Flexible budget machine maintenance cost =$180 - $166 = $14
Chemicals variance = Actual chemicals cost - Flexible budget chemicals cost = $500 - $498 = $2
Salaries and wages variance = Actual salaries and wages cost - Flexible budget salaries and wages cost = $2,500 - $2,300 = $200
Depreciation variance = Actual depreciation cost - Flexible budget depreciation cost = $800 - $800 = $0
Utilities variance = Actual utilities cost - Flexible budget utilities cost = $450 - $400 = $50
Rent variance = Actual rent cost - Flexible budget rent cost = $1,100 - $1,100 = $0
Finally, we can summarize the variances in the flexible budget performance report:
Flexible Budget Performance Report:
________________________________________________
| Overhead Category | Actual Costs | Flexible Budget | Variance |
|___________________|_____________|_________________|_________|
| Supplies | $320 | $332 | -$12 |
| Machine Maintenance| $180 | $166 | $14 |
| Chemicals | $500 | $498 | $2 |
| Salaries and Wages| $2,500 | $2,300 | $200 |
| Depreciation | $800 | $800 | $0 |
| Utilities | $450 | $400 | $50 |
| Rent | $1,100 | $1,100 | $0 |
|___________________|_____________|_________________|_________|