Answer:
Zachary Medical Equipment Company
Production Department Flexible Budget for 2019:
Flexible Budget Actual Results Variance
24,900 kits 24,900 kits 0
Direct Materials $179,280 $217,180 ($37,900) U
Direct Labor $154,380 $147,280 $7,100 F
Variable Overhead $37,350 $39,850 ($2,500) U
Total Variable Costs $371,010 $404,310 ($33,300) U
Fixed Overhead $212,900 $212,900 0
Total Cost $583,910 $617,210 $33,300 U
The following costs were flexed, using the budgeted and actual production units:
a) Direct materials cost = $165,600/23,000 * 24,900 = $179,280
b) Direct labor cost = $142,600/23,000 * 24,900 = $154,380
c) Variable overhead = $34,500/23,000 * 24,900 = $37,350
d) Fixed overhead under flexible budget would equal actual.
Explanation:
A flexible budget is a budget that changes in accordance with the level of activity or production volume. It is unlike a static budget, which does not change no matter the activity level or production volume.
A flexible budget is better in order to appraise the performance of a manager. It judges a manager's performance based on flexed activity level. It is a better tool in decision making.
In this case, whereas, the static budget yielded a total variance of $57,510 unfavorable, the flexible budget resulted to a total variance of $33,300 unfavorable.
