B&L Landscapes, Inc. Mini Practice Part 5

Bill Graham and Larry Miller incorporated B&L Landscapes, Inc. on July 1, 2014. The business consists of lawn care and sprinkler system installations. In addition, they also sell two types of fertilizer.    

During 2015, B&L Landscapes, Inc. acquired a 30% interest in Crestline Pipe. The president of Crestline wants to develop a management report to evaluate Manufacturing Overhead costs. Bill and Larry want to help and have volunteered your services to provide some managerial reporting for Crestline.

Crestline Pipe distributes high-quality PVC pipe and has the following information for the month of March, 2015

Crestline Pipe                                                                       Crestline Pipe

Manufacturing Overhead Budget (Static)                        Manufacturing Overhead Costs (Actual)

For the Month of March, 2015                                            For the Month of March, 2015

Budgeted production in LF         117,500                  Actual production in LF         118,500

Budgeted costs                                                          Actual costs

Indirect materials ($0.30/DLH) $ 7,050                       Indirect materials            $ 7,100

Indirect labor ($0.50/DLH)       11,750                        Indirect labor                     11,825

Utilities ($0.45/DLH)                  10,575                        Utilities                                10,700

Maintenance ($0.25/DLH)        5,875                        Maintenance                      5,900

Salaries                                     42,000                        Salaries                               42,000

Depreciation                            16,800                        Depreciation                      16,800

Property taxes                           2,500                        Property taxes                     2,500

Insurance                                   1,200                        Insurance                             1,200

Janitorial                                    1,300                        Janitorial                              1,300

Total budgeted costs                 $99,050                  Total costs                              $99,325

Crestline Pipe had the following static budget and overhead costs for March. Manufacturing overhead is budgeted based on direct labor hours (DLH). Direct labor is budgeted at 12 minutes per linear foot (LF).

Instructions:

Prepare a flexible manufacturing overhead budget based on the following amounts produced.

115,500 LF

116,500 LF

117,500 LF

118,500 LF

119,500 LF

Prepare a flexible budget report showing the differences (favourable and unfavourable) in manufacturing overhead costs for the month of March. Include your analysis of what variances should be investigated further.

Prepare a responsibility report for the manufacturing overhead for March, assuming only variable costs are controllable. Provide a brief evaluation of how this information could be used to measure the manufacturing manager’s performance.