Master Budgeted income statement using Variable Costing.
Downes Consolidated Industries International uses a standard cost system and records standards in the accounting records. The standard costs for one unit of one of its products are as follows.
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Direct Materials, 3lbs.@$20 per lb.
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$ 60.00
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Direct labor, 2 hrs. @$15 per hr.
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$ 30.00
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Variable overhead, 4machine hrs. @$1 per hr
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$ 4.00
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Fixed overhead, 4 machine hrs.@$2.50 per hr
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$ 10.00
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Total
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$104.00
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Overhead is applied on the basis of machine hours. The planned level of activity(denominator level) is 320,000 machine hours. The total budgeted fixed overhead is $800,000.
Other budgeted items are:
Unit selling price, $170,00 per unit
Variable selling & administrative expenses, $5 per unit
Fixed selling & administrative expenses, $160,000.
Planned level of production and sales, 80,000.