Gundy Company expects to produce 1,243,200 units of Product XX in 2020. Monthly production is expected to range from 79,000 to 121,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $7, and overhead $10. Budgeted fixed manufacturing costs per unit for depreciation are $5 and for supervision are $3. In March 2020, the company incurs the following costs in producing 100,000 units: direct materials $425,000, direct labor $695,000, and variable overhead $1,005,000. Actual fixed costs were equal to budgeted fixed costs. Required:
Prepare a flexible budget report for March.

Gundy Company

Flexible Budget Report for the month of March, 2020:

                          Flexible Budget     Actual Budget     Variance

Direct materials    $400,000              $425,000       $25,000 U

Direct labor           $700,000              $695,000         $5,000 F

Overhead           $1,000,000            $1,005,000         $5,000 U

Fixed Cost            $632,000              $632,000          $0        None

Explanation:

a) Data and Calculations:

Expected production units for 2020 = 1,243,200

Monthly production range = 79,000 to 121,000

Budgeted variable manufacturing costs per unit are:

Direct materials $4

Direct labor        $7

Overhead        $10

Total variable cost   $21

Budgeted fixed manufacturing costs per unit:

Depreciation   $5

Supervision     $3     $8

Total costs    $29

Total fixed cost = 79,000 * $8 = $632,000

Actual costs incurred in March 2020:

Production units = 100,000

Direct materials = $425,000 ($4.25 per unit)

Direct labor = $695,000 ($6.95 per unit)

Variable overhead = $1,005,000 ($10.05 per unit)

Actual fixed costs = $632,000

Flexible Budget:

Direct materials $400,000 ($4 * 100,000)

Direct labor        $700,000 ($7 * 100,000)

Overhead        $1,000,000 ($10 * 100,000)

Fixed Cost         $632,000

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