Chapter 21: Q6QS (page 968)
Refer to information in QS 21-5. Assume the actual cost to manufacture one metal bat is $40. Compute the cost variance and classify it as favorable or unfavorable.
The cost variance analysis is unfavorable.
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AirPro Corp. reports the following for November. Compute the total overhead variance and controllable overhead variance for November and classify each as favorable or unfavorable.
Actual total factory overhead incurred \(28,175
Standard factory overhead:
Variable overhead \)3.10 per unit produced
Fixed overhead
(\(12,000/12,000 predicted units to be produced) \)1 per unit
Predicted units to produce 12,000 units
Actual units produced 9,800 units
Refer to the information in Problem 21-1A. Phoenix Company’s actual income statement for 2017 follows.
PHOENIX COMPANY Statement of Income from Operations For Year Ended December 31, 2017 |
Sales (18,000 units) | \(3,648,000 | |
Cost of goods sold | ||
Direct materials | \)1,185,000 | |
Direct labor | 278,000 | |
Machinery repairs (variable cost) | 63,000 | |
Depreciation-Plant equipment | 300,000 | |
Utilities (Fixed cost is \(147,500) | 200,500 | |
Plant management salaries | 210,000 | 2,236,500 |
Gross profit | 1,411,500 | |
Selling expenses | ||
Packaging | 87,500 | |
Shipping | 118,500 | |
Sales salary (annual) | 268,000 | 474,000 |
General and administrative expenses | ||
Advertising expense | 132,000 | |
Salaries | 241,000 | |
Entertainment expense | 93,500 | 466,500 |
Income from operations | \)471,000 |
Required
1. Prepare a flexible budget performance report for 2017.
Analysis Component
2. Analyze and interpret both the
(a) sales variance and
(b) direct materials cost variance.
After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and \(15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a \)247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.
1. Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable.
2. Interpret the October direct labor variances.
Blaze Corp. applies overhead on the basis of direct labor hours. For the month of March, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following budget.
Overhead Budget | Operating Level 80% |
Production in units | 8,000 |
Standard direct labor hours | 32,000 |
Budgeted overhead | |
Variable overhead costs | |
Indirect materials | \(10,000 |
Indirect labor | 16,000 |
Power | 4,000 |
Maintenance | 2,000 |
Total variable costs | 32,000 |
Fixed overhead costs | |
Rent of factory building | 12,000 |
Depreciation-Machinery | 20,000 |
Taxes and Insurance | 2,400 |
Supervisory salaries | 13,600 |
Total fixed costs | 48,000 |
Total overhead costs | \)80,000 |
During March, the company operated at 90% capacity (9,000 units), and it incurred the following actual overhead costs.
Overhead costs (actual) | |
Indirect materials | \(10,000 |
Indirect labor | 16,000 |
Power | 4,500 |
Maintenance | 3,000 |
Rent of factory building | 12,000 |
Depreciation-Machinery | 19,200 |
Taxes and Insurance | 3,000 |
Supervisory salaries | 14,000 |
Total actual overhead costs | \)81,700 |
1. Compute the overhead controllable variance.
2. Compute the overhead volume variance.
3. Prepare an overhead variance report at the actual activity level of 9,000 units.
Juan Company’s output for the current period was assigned a \(150,000 standard direct materials cost. The direct materials variances included a \)12,000 favorable price variance and a $2,000 favorable quantity variance. What is the actual total direct materials cost for the current period?
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