Wattis Manufacturing Has Established the Following Master Flexible Budget

question 208

Essay

Wattis Manufacturing has established the following master flexible budget:

$\begin{array} { l ccc } & & \underline { \text { Production in Units } } & \\&\underline { 100,000 } & \underline { 150,000 } & \underline { 200,000 }\\\text { Variable expenses: } & \\\text { Raw materials } & \$ 220,000 & 330,000 & 440,000 \\\text { Direct labour } & 240,000 & 360,000 & 480,000 \\\text { Manufacturing overhead } & 180,000 & 270,000 & 360,000 \\\text { Selling and administrative } & \underline { 100,000 } & \underline { 150,000 } & \underline { 200,000 } \\\text { Total variable expenses } & \underline { \$ 740,000 } & \underline { \$ 1.40,000 } & \underline { \$ 1,480,000 }\end{array}$ $\begin{array}{l}\text { Fixed expenses: }\\\begin{array} { l r r r } \text { Manufacturing overhead } & \$ 337,500 & \$ 337,500 & \$ 337,500 \\\text { Selling and administrative } & \underline { 250.000 } & \underline { 250.000 } & \underline { 250.000 } \\\text { Total fixed expenses } & \underline { \$ 587.500 } & \$ \underline { \underline { 587.500 } } & \$ \underline { 587.500 }\end{array}\end{array}$ Total expenses $\quad$ $\$ 1.327,500 \quad \quad\$ 1,697,500$ $\quad$ $\$ 2,067,500$

Manufacturing overhead is applied on the basis of machine hours. At standard, each unit of product requires one machine hour to complete.

Required:

a) The denominator activity level is 150,000 units. What are the predetermined variable and fixed manufacturing overhead rates?
b) Actual data for the year were as follows:

$\begin{array} { l r } \text { Actual variable manufacturing overhead cost } & \$ 211,680 \\\text { Actual fixed manufacturing overhead cost } & \$ 343,000 \\\text { Actual machine hours incurred } & 126,000 \\\text { Units produced } & 120,000\end{array}$

Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances for the year.

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