Operating expenses:
Fixed ……………………………………….. $12,000
Variable ……………………………………. 40,000 52,000
Income from operations ……………………….. $ 48,000
The company’s actual activity tor the year follows:
Sales (21,000 units) ……………………………. $651,000
Cost of goods sold:
Direct materials …………………………….. $231,000
Direct labor ………………………………… 168,000
Variable overhead ………………………….. 73,500
Fixed overhead …………………………….. 77,500 550,000
Gross profit ……………………………………. $101,000
Operating expenses:
Fixed ………………………………………. 12,000
Variable ……………………………………. 39,500 51,500
Income from operations ………………………. $ 49,500
Required:
Prepare a flexible budget performance report for the year using the contribution margin
format.
131. Perkins Company provides the following data developed for its master budget:
Sales price ……………………… $11.00 per unit
Costs:
Direct materials ………………. $3.00 per unit
Direct labor …………………… $4.25 per unit
Variable overhead ……………. $0.50 per unit
Factory depreciation …………. $12,000 per month
Supervision …………………… $11,000 per month
Selling expense ……………….. $0.25 per unit
Administrative cost …………… $9,000 per month
Required:
Prepare flexible budgets for sales of 20,000, 22,000 and 24,000 units. Use a contribution
margin format.
132. Elroy Co. has prepared the following fixed budget for the year, assuming production and
sales of 30,000 units. This level of production represents 80% of capacity.
Elroy Co.
Fixed Budget
For Year Ending December 31
Sales ……………………………………. $1,500,000
Cost of good sold:
Direct materials ………………… $540,000
Direct labor …………………….. 300,000
Indirect materials (variable) ….... 15,000
Indirect labor (variable) ………... 21,000
Depreciation ……………………. 180,000
Salaries …………………………. 90,000
Utilities (80% fixed) ……………. 54,000
Maintenance (40% variable) …… 33,000 1,233,000
Gross profit ……………………………… $ 267,000
Operating expenses:
Commissions …………………… $ 45,000
Advertising (fixed) ……………... 60,000
Wages (variable) ……………….. 15,000
Rent …………………………….. 30,000
Total operating expenses ………. 150,000
Income from operations ………………... $ 117,000
Calculate the following flexible budget amounts at the indicated levels of capacity:
Operations at
60% of Capacity Operations at
75% of Capacity
Sales
Total variable costs
Total fixed costs
Income from operations
133. Big Bend Co. fixed budget for the year is shown below:
Sales (50,000 units) …………………………. $1,300,000
Cost of goods sold:
Direct materials ………………………… $150,000
Direct labor ……………………………… 450,000
Overhead (includes $2 per unit variable
overhead) ………………………………….. 240,000 840,000
Gross profit ……………………………… $ 460,000
Selling expenses:
Sales commissions (all variable) ……….. 60,000
Rent (all fixed) …………………………. 40,000
Insurance (all fixed) ……………………. 35,000
General and administrative expenses:
Salaries (all fixed) ……………………… 72,000
Rent (all fixed) …………………………. 54,000
Depreciation (all fixed) …………………. 31,000 292,000
Net income from operations ………………… $ 168,000
Prepare a flexible budget for Big Bend Co. that shows a detailed budget for its actual sales
volume of 42,000 units. Use the contribution margin format.
134. Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to
make 4,000 units of its product. In actually making 4,000 units, the company used 18,800
pounds that cost $2.54 per pound. Calculate the direct materials price variance.
135. Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to
make 4,000 units of its product. In actually making 4,000 units, the company used 18,800
pounds that cost $2.54 per pound. Calculate the direct materials quantity variance.
136. Job #305 was budgeted to require 3.5 hours of labor at $11.00 per hour. However, it was
completed in 3 hours by a person who worked for $14.00 per hour. What is the total labor cost
variance for Job #305?
137. DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame. DT’s
standard labor cost is $11.00 per hour. During March, DT produced 4,000 frames and used
12,400 hours at a total cost of $133,920. What is DT’s labor rate variance for March?
23–19
138. In producing 700 units of Product CBA last period, Cobalt Company used 5,000 pounds
of Material H, costing $34,250. The company has established the standard of using 7.2
pounds of Material H per unit of CBA, at a price of $7.50 per pound. Calculate the materials
price and quantity variances associated with producing the 700 units, and indicate whether
they are favorable or unfavorable:
139. Use the following cost information to calculate the direct labor rate and efficiency
variances and indicate whether they are favorable or unfavorable.
Actual costs and quantities:
Direct labor cost incurred ………….. $360,000
Direct labor hours used …………….. 20,000 hours
Units produced ………………..…… 45,000 units
Standard costs and quantities:
Direct labor rate per hour ………….. $16.50
Hours to produce one unit …………. 0.5 hours
140. The following information describes production activities of the Central Corp.:
Raw materials used …………………… 16,000 lbs. at $4.05 per lb.
Factory payroll ………………………… 5,545 hours for a total of $72,085
30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour
Compute the direct materials price and quantity and the direct labor rate and efficiency
variances. Indicate whether each variance is favorable or unfavorable.
141. Duval, Inc. budgets direct materials at $1/liter and each product requires 4 liters per unit
of finished product. April’s activities show usage of 832 liters to complete 196 units at a cost
of $798.72. Compute the direct materials price and quantity variances. Indicate if the variance
if favorable or unfavorable.
142. Tiger, Inc. has developed the following standard cost data based on 60,000 direct labor
hours, which is 75% of capacity.
Per Unit
Direct materials (6 lbs. @ $2.00/lb.) $12.00
Direct labor (1 hrs. @ $8.00/hr.) 8.00
During the last period, the company operated at 80% of capacity and produced 128,000 units.
Actual costs were:
Direct materials (760,000 lbs.) $1,558,000
Direct labor (126,000 hrs.) 1,014,300
Determine the direct materials price and quantity variances and the direct labor rate and
efficiency variances. Indicate whether each variance is favorable or unfavorable.
Direct materials:
Price variance
Quantity variance
Direct labor:
Rate variance
Efficiency variance
143. Fairfield Co. collected the following information about its production activities for the
current year.
a. Compute the direct materials price and quantity variances and indicate whether each is
favorable or unfavorable.
b. Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs. @ $6.30 per lb.
Units completed during the year, 50,000 units
Standard costs and quantities:
Price per lb. of direct material, $6.05
Two lbs. of direct material per unit
144. Falcon Company’s output for a period was assigned the standard direct labor cost of
$17,160. If the company had a favorable direct labor rate variance of $1,000 and an
unfavorable direct labor efficiency variance of $275, what was the total actual cost of direct
labor incurred during the period?
145. Woods, Inc. budgeted the following overhead costs for the current year assuming
operations at 80% of capacity, or 40,000 units:
Total variable overhead ……………. $240,000
Total fixed overhead ………………. 560,000
Total overhead ……………………. $800,000
The standard cost per unit when operating at this same 80% capacity level is:
Direct materials (5 lbs. @ $4/1b.) ………… $20.00
Direct labor (2 hrs. @ $8.75 hr.) …………. 17.50
Variable overhead (2 hrs. @ hrs. $3/hr.) ………… 6.00
Fixed overhead (2 hrs. @ $7/hr.) …………. 14.00
Total cost per unit …………………………. $57.50
The actual production achieved in the current year was 60% of capacity, or 30,000 units. The actual
costs were:
Direct materials (150,350 lbs.) …………. $616,435
Direct labor (59,800 hrs.) ………………. 520,260
Variable overhead ………….…………… 192,000
Fixed overhead ………….………….…... 552,000
Calculate the following variances and indicate whether each is favorable or unfavorable.
Direct materials:
Price variance
Quantity variance
Direct labor:
Rate variance
Efficiency variance
Variable overhead:
Spending variance
Efficiency variance
Fixed overhead:
Spending variance
Volume variance
23–26
146. Manatee Corp. has developed standard costs based on a predicted operating level of
352,000 units of production, which is 80% of capacity. Variable overhead is $281,600 at this
level of activity, or $0.80 per unit. Fixed overhead is $440,000. The standard costs per unit
are:
Direct materials (0.5 lbs. @ $1/1b.) …… $0.50 per unit
Direct labor (1 hour @ $6/hour) ………. $6.00 per unit
Overhead (1 hour @ $2.05/hour) ……… $2.05 per unit
Manatee actually produced 330,000 units at 75% of capacity and actual costs for the period
were:
Direct materials (162,000 lbs.) ………. $ 170,100
Direct labor (329,500 hours) …………. $2,042,900
Fixed overhead ………………………… $ 438,000
Variable overhead ……………………. $ 262,000
Calculate the following variances and indicate whether each variance is favorable or
unfavorable:
(1) Direct labor efficiency variance: $__________________
(2) Direct materials price variance: $__________________
(3) Controllable overhead variance: $__________________
147. The following information comes from the records of Dina Co. for the current period.
a. Compute the direct materials price and quantity variances, direct labor rate and efficiency
variances and state whether the variance is favorable or unfavorable.
b. Prepare the journal entries to charge direct materials and direct labor costs to goods in
process and the materials and labor variances to their proper accounts.
Actual costs and quantities:
Direct materials used ………………… 38,000 feet @ $6.20 per foot
Direct labor hours used ……………… 50,660 hours
Direct labor rate per hour ……………. $16
Factory overhead …………………….. $211,600
25,000 units were produced during the period.
Standard costs and quantities per unit:
Direct materials ……………………… 1.5 ft. @ $6.10 per ft.
Direct labor …………………………... 2 hours @ $17 per hour
Factory overhead (based on budgeted production of 24,500 units)
Variable overhead $2.25/direct labor hour
Fixed overhead $1.95/direct labor hour