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Solomon Medical Equipment Company makes a blood pressure measuring kit

Accounting

Solomon Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department's static budget and actual results for 2019 follow:

 

  Static Budget  Actual Results

Production in units 33,000 kits  34,100 kits

Direct materials  $211,200    $255,340  Direct labor   178,200     177,240  Variable manufacturing overhead   49,500     54,150  Total variable costs   438,900     486,730  Fixed manufacturing overhead   209,000     203,900

Total manufacturing cost  $647,900    $690,630 

 

 

a. Convert the static budget into a flexible budget.

b. Calculate the variances.

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a)

Solomon Medical Equipment company
Flexible budget 34100 Kits
     
Particulars   Amount $
     
Direct Material ($211200/33000 Kits)*34100 Kits 218240
Direct Labor ($178200/33000 Kits)*34100 Kits 184140
Variable Manufacturing Overhead ($49500/33000 Kits)*34100 Kits 51150
Total Variable costs   453530
Fixed Manufacturing Overhead   209000
     
Total Manufacturing Cost   662530

b)

Adam Medical Equipment company
Variance Report
         
Particulars Flexible budget Actual Results Variance Remark
         
Direct Material 218240 255340 -37100 Unfavorable
Direct Labor 184140 177240 6900 Favourable
Variable Manufacturing Overhead 51150 54150 -3000 Unfavorable
Total Variable costs 453530 486730 -33200 Unfavorable
Fixed Manufacturing Overhead 209000 203900 5100 Favourable
         
Total Manufacturing Cost 662530 690630 -28100 Unfavourable

 

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