This Website Has Been Moved to a New Link


Loading

Paragon Inc. normally manufactures between 36,000 and 42,000

Price: $8.99


Paragon Inc. normally manufactures between 36,000 and 42,000 units each month. A static budget based on 36,000 units and actual results for April follows:

Budget
  Actual
Direct materials
$172,800
$175,900
Direct labor
  270,000
  258,000
Variable factory overhead
  115,200
  109,000
Supervision
  105,000
    82,600
Insurance & taxes
    60,000
    61,500
Depreciation
    84,000
    88,000

$807,000
$775,000

Conversations with Paragon's accountant revealed the following information:
April's production totaled 35,000 units.
Supervision, insurance and taxes, and depreciation are fixed costs.
Should production fall below 36,000 units, supervision costs are expected to be reduced by $20,000 because of temporary layoffs.

Instructions
a. Prepare a flexible budget for 36,000, 39,000, and 42,000 units of activity.
b. Prepare a performance report for April that can be used to judge Paragon's success or failure in meeting budgeted targets. Comment on your findings.
c. Explain the flexibility that is associated with a flexible budget.

No comments:

Post a Comment