A.

Revenue budget
March 31, 2008

Budgeted sales in units Target selling price Budgeted revenue

Executive line 740 birr 1,020 birr 754,800
Chairman line 390 1,600 624,000
total budgeted revenue birr 1,378,800

B. Production budget
March 31, 2008

Product Executive line chairman line

budgeted unit sales 740 390
Add: target ending finished goods inventory 30 15
Total required units 770 405
less: beginning finished goods inventory 20 5
Budgeted production(units to be produced) 750 400

Direct material usage budget

March 31, 2008

Materials Total
Oak top Oak legs Red oak top Red oak legs
Direct materials required 16sqf *750= 4legs*750=
for executive line 12,000 3000
Direct materials required 25sqf*400= 4legs*400=
for chairman line 10,000 1600
Total direct materials to 12,000sqs 3000legs 10,000sqf 1600legs
be used
Cost data Materials total
Oak top Oak legs red oak top red oak legs
Available from 320*18= 100*11=110 150*23= 3450 40*17= 680 10990
beginning direct 5760 0
materials inventory
Cost of units to be (12000-320) (3000-100) * (10,000- (1600-40)*18= 542730
purchase this period *20= 12= 34800 150)*25=2462 28080
233,600 50
Cost direct materials to 239360 35900 249700 28760 553720
used this period
 Direct material purchase budget

March 2008
Physical units Materials Total
Oak top Oak legs Red oak top Red oak legs
To be used in production 12000 sqf 3000 legs 10,000 sqf 1600 legs
add: target ending inventory (192 sqf 80 legs 200 sqf 44 legs
total requirements 12192 sqf 3080 legs 10200 sqf 1644 legs
Deduct: beginning inventory 320 sqf 100 legs 150 sqf 40 legs
purchase to be made 11,872 sqf 2,980 legs 10,050 sqf 1604 legs
Cost budget
11872*20= 2980*12= 10,050*25= 1604*18= 553322
237,440 35,760 251,250 28,872

Direct manufacturing labor budget

March 2008

items Production Direct Total Hourly wage Total direct

budget manufacturing hours rate labor cost
labor hour per unit budget
Executive line 750 3 hrs 2,250 birr 30 67,500
Chairman line 400 5hrs 2,000 30 60,000
total birr 127,500

Manufacturing Overhead Costs Budget

March 2008
Executive line Chairman line Total
Variable manufacturing overhead
Executive line(2250*birr 35), Chairman birr 78750 birr 70,000 birr148,750
line(2000* birr 35)
Fixed manufacturing overhead
(42,500*3/8; 42500*5/8) 15937.5 26562.5 42,500
Total budgeted manufacturing overhead birr 94687.5 birr 96562.5 Birr 191250
Unit Costs of Ending Finished Goods Inventory
Products
Cost per Unit Executive Line Chairman Line
of Input per Unit Total cost per Input per Unit Total cost per
Input of Output unit of output of Output unit of output
Oak top birr 20 16 sqf birr 320
Oak legs birr 12 4 legs 48
Red Oak Top birr 25 25 sqf 625
Red Oak legs birr 18 4 legs 72
DML birr 30 3 hrs 90 5 hrs 150
VMoH birr 35 3 hrs 105 5 hrs 175
FMoH 126.25 241.406
Total birr 689.25 birr 1263.406

Ending inventory Budget

March 2008
Quantity Cost per unit Total cost total
1. Direct materials inventory
Oak top 192 20 3840
Oak legs 80 12 960
Red Oak Top 200 25 5000
Red Oak legs 44 18 792 10,592
2. Finished Good Inventory
Executive Line 30 birr 689.25 20677.5
Chairman Line 15 birr 1263.406 18,951.09 39628.59
Total 50220.59

Cost of goods sold budget

March 2008
items Total costs
Beginning finished goods inventory 15,330
Direct materials used 553720
Direct manufacturing labor 127,500
manufacturing overhead costs 191250
Costs of goods manufactured 872470
Costs of goods available for sale 887800
Deduct: Ending Finished Goods Inventory 39628.59
Cost of Goods Sold Birr 848171.41
#2. Flexible budget and level 2 variance analysis
Actual Flexible Flexible Sales Volume Static Budget
Results Budget Budget Variance Amount
Variance Amount
Units Sold 13,000 0 13,000 2000U 15,000
Revenue Br. 2860,000 260,000F 2,600,000 400,000U Br. 3,000,000
Variable Br. 1,560,000 65,000U 1,495,000 230,000F Br. 1,725,000
Costs
Contribution Br.1 ,300,000 195,000F 1,105,000 170,000U Br. 1,275,000
Margin
Fixed Costs 950,000 150,000 U 800,000 0 800,000
Operating 350,000 45,000F 305,000 170,000U 475,000
Profit
Flexible budget variance Sales volume variance

#3
Actual Costs Flexible Budget
Incurred (Budgeted Input
Quantity Allowed for
Actual Input Quantity *
Actual Output *
Budgeted Price
(Actual Input Quantity* Budgeted Price)
Actual Price)
Direct materials 46000*1.92 46,000*2 (80*525)2
= 88,320 = 92,000 = 84,000
a. Material Price variance 3,680F
b. Material Quantity variance 8,000U

Actual Costs Flexible Budget

Incurred (Budgeted Input
Quantity Allowed for
Actual Input Quantity *
Actual Output *
Budgeted rate
(Actual Input Quantity* Budgeted rate)
Actual rate)
Direct materials 682.5*16.1 682.5*16 (1.25*525)*16
= 10988.25 = 10,920 = 10,500
c. Labor rate variance 68.25U
d. Labor Efficiency variance 420U
 e. Variable overhead spending and efficiency variance
Actual variable overhead Actual hour at standard Budgeted variable overhead
costs (AH*AR) rate cost(Flexible budget)
(AH*SR) (SH*SR)
270 hrs*51=13770 270hrs *50=13,500 300hrs*50= 15,000
spending variance efficiency variance

spending variance = 270U

efficiency variance = 1,500F