Jael Equipment uses a flexible budget for its indirect manufacturing costs. For 20×4, the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days. The costs and cost drivers were to be as follows:
Fixed Variable Cost driver
Product handling $30,000 $0.40 per unit
Inspection 8,000 8.00 per 100 unit batch
Utilities 400 4.00 per 100 unit batch
Maintenance 1,000 0.20 per machine-hour
Supplies 5.00 per employee day
During the year, the company processed 20,000 units, worked 7,500 employee days, and had 4,000 machine-hours. The actual costs for 20×4 were:
Product handling $36,000
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.
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