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
Manufacturing Overhead Budget (Static)
For the Month of March, 2015
Budgeted production in LF 117,500
Budgeted costs
Indirect materials ($0.30/DLH) 7,050
Indirect labor ($0.50/DLH) 11,750
Utilities ($0.40/DLH) 9,400
Maintenance ($0.25/DLH) 5,875
Salaries 42,000
Depreciation 16,800
Property taxes 2,500
Insurance 1,200
Janitorial 1,300
Total budgeted costs $97,875

Crestline Pipe
Manufacturing Overhead Costs (Actual)
For the Month of March, 2015
Actual production in LF 118,500
Actual costs
Indirect materials) 7,100
Indirect labor 11,825
Utilities 10,700
Maintenance 5,900
Salaries 42,000
Depreciation 16,800
Property taxes 2,500
Insurance 1,200
Janitorial 1,300
Total budgeted 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:

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

a) 115,500 LF
b) 116,500 LF
c) 117,500 LF
d) 118,500 LF
e) 119,500 LF

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

3. 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.