How much should have been spent during the month for the manufacture of the 1,500 units?


Question Description:

33

The manufacturing overhead budget for Reebles Company contains the following items: Variable costs Indirect materials $25,000 Indirect labor 12,000 Maintenance expenses 10,000 Manufacturing supplies 6,000 Total variable $53,000 Fixed costs Supervision $17,000 Inspection costs 1,000 Insurance expenses 2,000 Depreciation 15,000 Total fixed $35,000 The budget was based on an estimated 2,000 units being produced. During November, 1,500 units were produced, and the following costs incurred. Variable costs Indirect materials $25,000 Indirect labor 13,500 Maintenance expenses 8,200 Manufacturing supplies 5,100 Total variable $52,000 Fixed costs Supervision $19,300 Inspection costs 1,200 Insurance expenses 2,200 Depreciation 14,700 Total fixed $37,400 Instructions (a) Determine which items would be controllable by Ed Lopat, the production manager. (Assume “supervision” excludes Lopat’s own salary.) (b) How much should have been spent during the month for the manufacture of the 1,500 units? (c) Prepare a flexible manufacturing overhead budget report for Mr. Lopat. (d) Prepare a responsibility report. Include only the costs that would have been controllable by Mr. Lopat. In an attached memo, describe clearly for Mr. Lopat the areas in which his performance needs to be improved.

Answer

33