Chapter 23: Q7RQ (page 1305)
Question:What is a flexible budget performance report?
Answer
The flexible budget performance report comparesactual performance with budgeted performance.
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Murphy Company managers received the following incomplete performance report:
Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)
Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.
What is a variance?
Preparing a flexible budget computing standard cost variance
Morton Recliners manufactures leather recliners and uses flexible budgeting and a
standard cost system. Morton allocates overhead based on yards of direct materials.
The company’s performance report includes the following selected data:
Static Budget Actual Results (1,000 recliners) (980 recliners) |
Sale (1,000 recliners \(505 each) \) 505,000 (980 recliners \(480 each) \) 470,400 |
Variable Manufacturing Costs: Direct Materials (6,000 yds. @ \(8.60/yd.) 51,600 (6,143 yds. @ \)8.40/yd.) 51,601 Direct Labor (10,000 DLHr @ \(9.20/DLHr) 92,000 (9,600 DLHr @ \)9.30/DLHr) 89,280 Variable Overhead (6,000 yds. @ \(5.20/yd.) 31,200 (6,143 yds. @ \)6.60/yd.) 40,544 |
Fixed Manufacturing Costs: Fixed Overhead 60,600 62,600 Total Cost of Goods Sold 235,400 244,025 |
Gross Profit \( 269,600 \) 226,375 |
Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost,variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
3. Have Morton’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Morton’s managers can benefit from the standard cost system.
Matthews Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 143,000 square feet of extruded vinyl purchased at \(1.30 per square foot. Production required 400 direct labor hours that cost \)16.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of \(1.35 per square foot. The labor standard was 0.028 direct labor hour per fender, at a standard cost of \)15.00 per hour.
Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Matthews Fender’s managers have been making tradeoffs? Explain.
Question:List the direct materials variances, and briefly describe each.
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