Reference no: EM132653699

Bugis Bags uses an annual flexible budget based on standard direct machine hours for the following factory over-head items

                                        Fixed Cost                     Variable Cost per direct machine hour
Supplies                                $16,000                                 $0.30
Electricity                               19,600                                   0.20
Indirect Labor                              24,400                                  1.10

During the year, 15000 direct machine hours were recorded for the production achieved. The following actual costs were incurred:

Variable Costs:

Supplies $4800
Electricity 2900
Indirect Labor 17200

Fixed Costs:

Supplies $16500
Electricity 18800
Indirect Labor 24400

Required

Question A. Why is a flexible budget performance report a better basis for assessing a manager's performance than a fixed budget performance report?

Question B. Prepare flexible budget for the three cost items using 12000, 15000 and 18000 direct machine hours.

Question C. Prepare flexible budget performance report for the three cost items, based on the actual results for the year.