30 marks The following is the manufacturing overhead budget

(30 marks) The following is the manufacturing overhead budget for Hayes Ltd Hayes Ltod Manufacturing Overhead Budget Report For the month ended 30 November, 2016 Budget Actual Variable costs Indirect materials $18,750 $9,000 $7,500 $4.500 $39750 $25200 $13500 $8200 $5100 $52000 Indirect labour Maintenance expense Manufacturing supplies Total Variable costs Fixed Expenses Supervision Inspection costs $17,000 $1,000 $2,000 $15,000 $35,000 $74,750 $19,300 $1.600 $2,600 $14,700 $38,200 $90,200 Insurance expenses Depreciation Total Fixed costs Total costs

Solution

1 & 2) Variances: Budget Actual Variance F/U/N reasons VC: Ind Mat 18750 25200 -6450 U excessive materials used due to more wastage or improper norms Ind Lab 9000 13500 -4500 U due to more idle time and improper norms Maint. Exp 7500 8200 -700 U due to more wear and tears Manuf supplies 4500 5100 -600 U due to higher wages TVCs 39750 52000 -12250 U Mainly due improper norms FC: Super. 17000 19300 -2300 U due to more idle time, higher wages and improper norms Insp. Costs 1000 1600 -600 U due to more idle time, higher wages and improper norms Insu exp 2000 2600 -600 U Insurance at higher rates Dep 15000 14700 300 F Charged at lower rate TFCs 35000 38200 -3200 U Mainly due improper norms and standards TCs 74750 90200 -15450 U Mainly due improper norms and standards 3) IMPROVEMENT SUGGESSIONS : a) the norms must be improved with actual or present curcumstances b) Proper and good supervision over labors to reduce idle times. c) Re-scheduling of production process. d) Material must be properly used. 4) Yes, if the above norms and standards are for lower levels, then through flexible budgeting we must correct the standards or norms. After that the variances will improve.