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Q1) Downes Consolidated Industries International uses standard cost system and records standards in accounting records. Standard costs for one unit of one of its products are as follows.

Direct Materials, 3lbs.@$20 per lb. $ 60.00
Direct labor, 2 hrs. @$15 per hr. $ 30.00
Variable overhead, 4machine hrs. @$1 per hr $ 4.00
Fixed overhead, 4 machine hrs.@$2.50 per hr $ 10.00
Total $104.00

Overhead is applied on basis of machine hours. Planned level of activity(denominator level) is 320,000 machine hours. Total budgeted fixed overhead is $800,000.

Other budgeted items are:
Unit selling price, $170,00 per unit
Variable selling & administrative expenses, $5 per unit
Fixed selling & administrative expenses, $160,000.
Planned level of production and sales, 80,000.
Direct materials purchased, 250,000 lbs.@$22 per lb.
Direct materials used, 240,000
Direct labor, 150,000 hrs, total cost, $2,225,000
Variable overhead, $340,000
Fixed overhead, $810,000
Units produced, 82,000 Units
Units sold, 80,500
Selling price per unit,160,00
Variable selling and administrative expenses, $410,000.
Fixed selling & administrative , $175,000.
Actual machine hours,330,000.


Create a Flexible Budgeted Income Statement by using variable costing.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M921620

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