Problem - B&L Landscapes, Inc. Mini Practice Part

Bill Graham and Larry Miller incorporated B&L Landscapes, Inc. on July 1, 2016. The business consists of lawn care and sprinkler system installations. In addition, they also sell two types of fertilizer.

During 2017, 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, 2018

Crestline Pipe Manufacturing Overhead Budget (Static) For the Month of March, 2018

Budgeted production in LF                              117,500

Budgeted costs

Indirect materials ($0.30/DLH)                       7,050

Indirect labor ($0.50/DLH)                             11,750

Utilities ($0.45/DLH)                                      10,575

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                                    $99,050

Crestline Pipe Manufacturing Overhead Costs (Actual) For the Month of March, 2018

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.