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Question
Submitted by lbrnch on Sat, 2012-05-12 17:35
due on Sun, 2012-05-13 17:31
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accounting

Evening Star, Inc. produces binoculars of two quality levels: field and professional. The field model requires threee direct-labor hours, while the professional binoculars require five hours. The firm uses direct-labor hours for flexible budgeting.

1. How many standard hours are allowed in May, when 200 field models and 300 professional binoculars are manufactured?

2. Suppose the company based its flexible overhead budget for May on the number of binoculars manufactured, which is 500. What difficulties would this approach cause?

Answer
Submitted by Asma on Sun, 2012-05-13 00:46
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Star Inc. -Base for flexible overhead budget

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xxxxxxxxxxxxxx

xx

xxxxxxxxxx

Standard

Hours per xxxx

Number

of xxxxx

Total

xxxxxxxx Hours

xxxxx x

x

xxx

xxx

Professional

5

300

1,500

Total x

2,100

The total standard xxxxxxx direct-labor hours in May = 2,100 xxxxxx

xx

xxxxxx flexible xxxxxxxx xxxxxx xxxxx on total xxxxxx of xxxxxxxxxx produced will not xx xxxxxxxxxx xxxxxxxxx 500 binoculars xxxx xxx xxxxxx and 400 xxxxxxxxxxxxxx Basing on the composition xx xxx xxxxx different types of direct labor xxxxx xx expected and different amounts of xxxxxxxxxxxxxxxxx costs would be found. This can create xxx of confusion xxx xxxxxxxxxxxxxxxxx So, xxxxxx xxx xxxxxxxx xxxxxx on number of xxxxxxxxxx xx meaningless.


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Answer
Submitted by shahimermaid on Sat, 2012-05-12 22:55
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the answer is explained in the simplest way

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xxxxxx many standard xxxxx xxx xxxxxxx in May, xxxx 200 field models and 300 professional binoculars xxx xxxxxxxxxxxxx

xx hours xxx xxxxx xxxxxx xxx x 3= 600 xxxxx

DL xxxxx for xxxxxxxxxxxx xxxxxx xxx x 5= 1500 xxxxx

Standard xxxxx allowed= xxxxxxxx x xxxx hour

2. Suppose xxx xxxxxxx xxxxx xxx xxxxxxxx xxxxxxxx xxxxxx xxx xxx on xxx xxxxxx of binoculars manufactured, xxxxx xx 500. What xxxxxxxxxxxx xxxxx this approach xxxxxx

We will xxxx difficulty xx xxxxxxxxxx overhead xxxxx to xxx types xx xxx binoculars. In flexible xxxxxxxx budget, xxx costs xxxx with xxx level of activity but xxxxx both the xxxxxx xx xxxxxxxxxx requires xxxxxxx xxx xxxxxxxx and differ in the xxxx xxxxxxxx xx xxxx them, xx will xxx xx xxxx to find true xxxxxxx when the xxxxxxxxxxxxxxx is xxx given.

It xxxxx not xxxx sense xx xxxx flexible budget xx hours when xxxxxx is xx xxxxxxxxx xxxxxxxx with xxxxxxxxx xxxxxxxxxxx xx hours.

xx such case the xxxxxxxx xxxxxx xxxxxx be based xx xxxxxx actually required by different xxxxx xx binoculars


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