Flexible Budget Reports - controlling overhead costs The...

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FLEXIBLE BUDGET REPORTS Flexible budget reports are another type of internal report. The flexible budget report consists of two  sections: (1) production data for a selected activity index, such as direct labor hours, and (2) cost data  for variable and fixed costs. The report provides a basis for evaluating a manager's performance in  two areas: production control and cost control. Flexible budget reports are widely used in production  and service departments. Illustration  21-16  shows a budget report for the Finishing Department of Fox Company for the month  of January. In this month, 9,000 hours are worked. The budget data are therefore based on the  flexible budget for 9,000 hours in Illustration  21-13 . The actual cost data are assumed.  Illustration 21-16    Overhead flexible budget report How appropriate is this report in evaluating the Finishing Department manager's performance in 
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Unformatted text preview: controlling overhead costs? The report clearly provides a reliable basis. Both actual and budget costs are based on the activity level worked during January. Since variable costs generally are incurred directly by the department, the difference between the budget allowance for those hours and the actual costs is the responsibility of the department manager. In subsequent months, Fox Manufacturing will prepare other flexible budget reports. For each month, the budget data are based on the actual activity level attained. In February that level may be 11,000 direct labor hours, in July 10,000, and so on. Note that this flexible budget is based on a single cost driver . A more accurate budget often can be developed using the activity-based costing concepts explained in Chapter 17 ....
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  • Fall '11
  • -
  • 9,000 hours, Fox Manufacturing, Finishing Department manager, Finishing Department of Fox Company, flexible budget reports

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