# Flexible Budgets and Overhead Variance Analysis Management Accounting

Problem 1

Using the following information, prepare a flexible budget for the production of 80% and 100% activity.

Solution

Problem 2

The following data is available in a manufacturing company for a yearly period.

You should assume that the fixed expenses remain constant for all levels of production.

Semi-variable expenses remain constant between 45% and 65% capacity, increasing by 10% between 65% and 80% capacity, and by 20% between 80% and 100% capacity.

The sales at various levels of capacity are the following:

For this task, prepare a flexible budget for the year and forecast the profit at 60%, 75%, 90%, and 100% capacity.

Solution

Problem 3

A factory is currently working at 50% capacity and produces 10,000 units. Estimate the profits of the company when the factory works at 60% and 80% capacity, and offer your critical comments.

At 50% capacity, the cost of working raw materials increases by 2% and the selling price falls by 2%.

At 80% capacity, the working raw materials cost increases by 5% and selling price falls by 5%.

Additionally, at 50% capacity, working the product costs \$180 per unit and it is sold at \$200 per unit.

The unit cost of \$180 consists of the following:

• Material: \$100
• Labor: \$30
• Factory overhead: \$30 (40% fixed)