Chapter 23: Q20RQ (page 1305)
Question:What is a standard cost income statement?
Answer
The standard cost income statement focuses on variances for the management
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McCarthy Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018. The 2018 revenue and cost information for McCarthy follows:
Sales Revenue \( 1,300,000
Cost of Goods Sold (at standard) 196,800
Direct materials cost variance 7,150 F
Direct materials efficiency variance 5,950 U
Direct labor cost variance 400 U
Direct labor efficiency variance 530 F
Variable overhead cost variance 650 U
Variable overhead efficiency variance 360 F
Fixed overhead cost variance 2,350 U
Fixed overhead volume variance 4,410 U
Assume each fender produced was sold for the standard price of \)65, and total selling and administrative costs were $250,000. Prepare a standard cost income statement for 2018 for McCarthy Fender
Question: How is a flexible budget used?
Headset manufactures headphone cases. During September 2018, the company produced 106,000 cases and recorded the following cost data:
Standard Cost Information
Quantity | Cost | |
Direct Materials | 2 parts | \( 0.16 per part |
Direct Labor | 0.02 hours | 8.00 per hour |
Variable Manufacturing Overhead | 0.02 hours | 11.00 per hour |
| Fixed Manufacturing Overhead (\)30,720 for static budget volume of 96,000 units and 1,920 hours, or \(16 per hour) | ||
Actual Information
Direct Materials (209,000 parts @ \)0.21 per part) \( 43,890 Direct Labor(1,620 hours @ \)8.10 per hour) 13,122 Variable Manufacturing Overhead 9,000 Fixed Manufacturing Overhead 30,000 |
Requirements
1. Compute the cost and efficiency variances for direct materials and direct labor.
2.For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.
3. Headset’s management used betterquality materials during September. Discuss the tradeoff between the two direct material variances.
Question:List the direct materials variances, and briefly describe each.
Calculating flexible budget variances
Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.
GRANT, INC. | |||||
Flexible Budget Performance Report (partial) | |||||
For the Month Ended April 30, 2018 | |||||
| ActualResults | Flexible Budget Variance | Flexible Budget | |||
| Units | 9,000 | (a) | 9,000 | ||
Sales Revenue | \(126,000 | (b) | (c) | \)108,000 | |
Variable Costs | \(52,300 | (d) | (e) | \)50,300 | |
Contribution Margin | \(73,700 | (f) | (g) | \)57,700 | |
Fixed Costs | \(16,100 | (h) | (i) | \)14,900 | |
Operating Income | \(57,600 | (j) | (k) | \)42,800 | |
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