The Condensed Flexible Budget of the Texas Company for the Year

question 114

Essay

The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour.The company produces a single product that requires 2.5 direct labor-hours to complete.Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity,but actually worked 96,000 hours during the year producing 37,000 units.Actual overhead costs for the year are: $$\begin{array} { | l | r | } \hline \text { Variable costs } & \$ 124,800 \\\hline \text { Fixed costs } & \underline { 158,800} \\\hline \text { Total overhead costs } & \underline {\$ 283,600 }\\\hline\end{array}$$
Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.Compute the variable overhead price variance and the variable overhead efficiency variance.b.Compute the fixed overhead spending (budget)variance and the production volume variance.

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Definitions:

Schedule

A plan that outlines specific times at which certain tasks or operations need to be carried out.

Current Budget Period

The specific time frame for which a budget is prepared, reflecting planned income and expenditures for that duration.

Selling and Administrative Budget

This is a detailed plan that outlines the expected expenses related to selling the products and managing the business operations.

Cash Budget

An estimation of cash inflows and outflows for a business over a specific period, used for managing the company's cash flow.