# Pacific Company_Flexible Budget

Question # 00003822 Posted By: ACCOUNTS_GURU Updated on: 11/21/2013 07:39 AM Due on: 12/31/2013
Subject Accounting Topic Accounting Tutorials:
Question

 Pacific Company provides the following information about its budgeted and actual results for June 2013. Although the expected volume for June was 25,000 units produced and sold, the company actually produced and sold 27,000 units. Budget data – 25,000 units (asterisks identify factory overhead items): Selling price \$5.00 per unit Variable costs (per unit of output) Direct materials 1.24 per unit Direct labour 1.50 per unit *Factory supplies 0.25 per unit *Utilities 0.50 per unit Selling costs 0.40 per unit Fixed costs (per month) *Amortization of machinery \$3,750 *Amortization of building 2,500 General liability insurance 1,200 Property taxes on office equipment 500 Other administrative expense 750

 Actual data – 27,000 units (asterisks identify factory overhead items): Selling price \$5.23 per unit Variable costs (per unit of output) Direct materials 1.12 per unit Direct labour 1.40 per unit *Factory supplies 0.37 per unit *Utilities 0.60 per unit Selling costs 0.34 per unit Fixed costs (per month) *Amortization of machinery \$3,710 *Amortization of building 2,500 General liability insurance 1,250 Property taxes on office equipment 485 Other administrative expense 900

Standard manufacturing costs based on expected output of 25,000 units:

 Per Unit of Output Quantity to be Used Total Cost Direct materials, 4 grams @ \$0.31/g \$1.24/unit 100,000 g \$31,000 Direct labour, 0.25 hr @\$6.00/hr \$1.50/unit 6,250 hr 37,500 Overhead \$1.00/unit 25,000

Actual costs incurred to produce 27,000 units:

 Per Unit of Output Quantity to be Used Total Cost Direct materials, 4 grams @ \$0.28/g \$1.12/unit 108,000 g \$30,240 Direct labour, 0.20 hr @\$7.00/hr \$1.40/unit 5,400 hr 37,800 Overhead Standard costs based on expected output of 27,000 units: \$1.20/unit 32,400 Per Unit of Output Quantity to be Used Total Cost Direct materials, 4 grams @ \$0.31/g \$1.24/unit 108,000 g \$33,480 Direct labour, 0.25 hr @\$6.00/hr \$1.50/unit 6,750 hr 40,500 Overhead 26,500 Required: 1. Prepare flexible budgets for June showing expected sales, costs, and income under assumptions of 20,000, 25,000, and 30,000 units of output produced and sold. 2. Prepare a flexible budget performance report that compares actual results with the amounts budgeted if the actual volume had been expected. 3. Apply variance analyses for direct materials, and direct labour.
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1. ## Solution: Pacific Company_Flexible Budget

Tutorial # 00003624 Posted By: ACCOUNTS_GURU Posted on: 11/21/2013 07:42 AM
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