Question

Wade Company estimates that it will produce 6,800 units of product IOA during the current month. Budgeted variable manufacturing costs per unit are direct materials $8, direct labor $13, and overhead $17. Monthly budgeted fixed manufacturing overhead costs are $8,300 for depreciation and $3,500 for supervision. In the current month, Wade actually produced 7,300 units and incurred the following costs: direct materials $51,800, direct labor $87,400, variable overhead $124,400, depreciation $8,300, and supervision $3,780.

Prepare a static budget report. Hint: The Budget column is based on estimated production while the Actual column is the actual cost incurred during the period. (List variable costs before fixed costs.) Wade Company Static Budget Report Difference Favorable Neither Favorable Budget Actual nor Unfavorable Were costs controlled?

Answer 1

Wade Company

Static Budget Report

Budget Actual Variance

Units of production 6,800 7,300 500 Favorable

Variable manufacturing costs:

Direct materials $54,400 $51,800 $2,600 Favorable

Direct labor 88,400 87,400 1,000 Favorable

Overhead 115,600 124,400 (8,800) Unfavorable

Sub-Total $258,400 263,600 ($5,200) Unfavorable

Fixed manufacturing costs:

Depreciation $8,300 $8,300 $0 Neither

Supervision 3,500 3,780 (280) Unfavorable

Sub-Total $11,800 $12,080 ($280) Unfavorable

Total $270,200 $275,680 ($5,480) Unfavorable

Some costs were controlled (direct materials and labor). The overhead costs were not very well controlled.

Step-by-step explanation:

a) Data and Calculations:

Estimated units of production of product IOA = 6,800 units

Budgeted variable manufacturing costs:

Direct materials $8 * 6,800 = $54,400

Direct labor $13 * 6,800 = $88,400

Overhead $17 * 6,800 = $115,600

Total= $38

Budgeted fixed manufacturing overhead costs:

Depreciation = $8,300

Supervision = 3,500

Total = $11,800

Actual:

Units produced = 7,300

Direct materials cost = $51,800

Direct labor cost = $87,400

Variable overhead = $124,400

fixed manufacturing overhead costs:

Depreciation = $8,300

Supervision = 3,780

Total = $12,080