Accounting Straightforward Variance Analysis And Basic Flexible Budgeting Homework Help
- October 4, 2017
- Posted by:
- Category: Accounting QA
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Variances For Direct Materials And Direct Labor
Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows.
Actual cost of fabric: $4.50 per square foot
Fabric consumed: 32,080 square feet
Standard price per square foot of fabric: $4.25
Standard direct labor rate: $10.00 per hour
Actual direct labor rate: $10.20 per hour
Actual labor hours worked: 11,940
Actual production completed: 4,000 flags
a. Compute the materials price variance and the materials quantity variance.
b. Compute the labor rate variance and the labor efficiency variance.
Overhead Variances
Nova Manufacturing applies factory overhead to products on the basis of direct labor hours. At the beginning of the current year, the company’s accountant made the following estimates for the forthcoming period
• Estimated variable overhead: $500,000
• Estimated fixed overhead: $400,000
• Estimated direct labor hours: 40,000
It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800. Assuming a direct labor standard of five hours per finished unit, calculate the following
a. Variable overhead efficiency variance
b. Fixed overhead volume variance
c. Overhead spending variance
Basic Flexible Budgeting
Centron, Inc., has the following budgeted production costs
Direct materials | $0.40 per unit |
Direct labor | 1.80 per unit |
Variable factory overhead | 2.20 per unit |
Fixed factory overhead | |
Supervision | $24,000 |
Maintenance | 18,000 |
Other | 12,000 |
The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively.
During the recent quarter ended March 31, Centron produced 25,500 units and incurred the following costs
Direct Materials | $10,710 | ||
Direct Labor | 47,175 | ||
Variable factory overhead | 51,940 | ||
Fixed factory overhead | |||
Supervision | 24,500 | ||
Maintenance | 23,700 | ||
Other | 16,800 | ||
Total production costs | $174,825 |
Instructions:
a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity.
b. Was Centron’s experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer.
c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance.
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Straightforward Variance Analysis
Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows.
Direct materials: 4 units @ $6.50 | $26.00 | |
Direct labor: 8 hours @ $8.50 | 68 | |
Variable factory overhead: 8 hours | @ $7.00 | 56 |
Fixed factory overhead: 8 hours | @ 2.5 | 20 |
Total standard cost per unit | $170.00 |
The following information pertains to activity for December:
1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations.
2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.
3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year.
4. Actual production amounted to 6,500 completed units.
Instructions
a. Compute Arrow’s direct material variances.
b. Compute Arrow’s direct labor variances.
c. Compute Arrow’s variances for factory overhead.
Product Code: ACC461
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