Author Question: River Falls Company uses a flexible budget for its indirect manufacturing costs. For 2017, the ... (Read 26 times)

tatyanajohnson · **on:** Mar 6, 2021

River Falls Company uses a flexible budget for its indirect manufacturing costs. For 2017, the company anticipated that it would produce 27,000 units with 4,800 machine-hours and 8,000 employee days. The costs and cost drivers were to be as follows:

Fixed

Variable

Cost driver

Product handling

$45,000

$0.75

per unit

Inspection

12,000

12.00

per 100 unit batch

Utilities

600

6.00

per 100 unit batch

Maintenance

1,250

0.25

per machine-hour

Supplies

5.00

per employee day

During the year, the company processed 26,500 units, worked 8,200 employee days, and had 4,850 machine-hours. The actual costs for 2017 were:

Actual costs

Product handling

$70,000

Inspection

16,000

Utilities

2,000

Maintenance

3,000

Supplies

40,000

Required:
a. Prepare the static budget using the overhead items above and then compute the static-budget variances.
b. Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

sierramartinez · **Reply #1 on:** Mar 6, 2021

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