Chapter 21: Q10E (page 972)
Refer to the information in Exercise 21-8 and compute the (1) direct labor rate and (2) direct labor efficiency variances. Indicate whether each variance is favorable or unfavorable.
Direct labor rate variance isunfavorable.
Direct labor efficiency variance is favorable.
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City Company’s fixed budget performance report for July follows. The \(647,500 budgeted total expenses include \)487,500 variable expenses and \(160,000 fixed expenses. Actual expenses include \)158,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.
Fixed Budget Actual Results Variances
Sales (in units) 7,500 7,200
Sales (in dollars) \(750,000 \)737,000 \(13,000 U
Total expenses 647,500 641,000 6,500 F
Income from operations \)102,500 \(96,000 \)6,500 U
Question: Refer to information in QS 21-3. Assume that actual sales for the year are \(480,000 (26,000 units), actual variable costs for the year are \)112,000, and actual fixed costs for the year are $145,000. Prepare a flexible budget performance report for the year.
Trico Company set the following standard unit costs for its single product.
Direct materials (30 Ibs. @ \(4 per Ib.) | \)120 |
Direct labor (5 hrs. @ \(14 per hr.) | 70 |
Factory overhead—variable (5 hrs. @ \)8 per hr.) | 40 |
Factory overhead—fixed (5 hrs. @ \(10 per hr.) | 50 |
Total standard cost | \)280 |
The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available.
| Operating Level | |||
| 70% | 80% | 90% | |
Production in units | 42,000 | 48,000 | 54,000 |
Standard direct labor hours | 210,000 | 240,000 | 270,000 |
Budgeted overhead | |||
Fixed factory overhead | \(2,400,000 | \)2,400,000 | \(2,400,000 |
Variable factory overhead | \)1,680,000 | \(1,920,000 | \)2,160,000 |
During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 265,000 hours. Units produced were assigned the following standard costs.
Direct materials (1,620,000 Ibs. @ \(4 per Ib.) | \)6,480,000 |
Direct labor (270,000 hrs. @ \(14 per hr.) | 3,780,000 |
Factory overhead (270,000 hrs. @ \)18 per hr.) | 4,860,000 |
Total standard cost | \(15,120,000 |
Actual costs incurred during the current quarter follow.
Direct materials (1,615,000 Ibs. @ \)4.10 per lb.) | \(6,621,500 |
Direct labor (265,000 hrs. @ \)13.75 per hr.) | 3,643,750 |
Fixed factory overhead costs | 2,350,000 |
Variable factory overhead costs | 2,200,000 |
Total actual costs | $14,815,250 |
Required
1. Compute the direct materials cost variance, including its price and quantity variances.
2. Compute the direct labor cost variance, including its rate and efficiency variances.
3. Compute the overhead controllable and volume variances.
How can the manager of advertising sales at Google use flexible budgets to enhance performance?
Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2017 reveals the following. Prepare flexible budgets following the format of Exhibit 21.3 that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.
Flexible Budget
Sales (7,000 units) \(2,800,000
Cost of goods sold
Direct materials \)280,000
Direct labor 490,000
Production supplies 175,000
Plant manager salary 65,000 1,010,000
Gross profit 1,790,000
Selling expenses
Sales commissions 140,000
Packaging 154,000
Advertising 125,000 419,000
Administrative expenses
Administrative salaries 85,000
Depreciation- Office equip. 35,000
Insurance 20,000
Office rent 36,000 176,000
Income from operations $1,195,000
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