Question

Budget Performance Report Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: Cost Category Standard Cost per 100 Two-Liter Bottles Direct labor $1.54 Direct materials 5.64 Factory overhead 0.26 Total $7.44 At the beginning of July, GBC management planned to produce 520,000 bottles. The actual number of bottles produced for July was 561,600 bottles. The actual costs for July of the current year were as follows: Cost Category Actual Cost for the Month Ended July 31 Direct labor $8,476 Direct materials 30,914 Factory overhead 1,475 Total $40,865

Answer 1

a
	Standard cost at planned volume (520,000 Bottles)
Manufacturing costs:
Direct labor	8008	=5200*1.54
Direct materials	29328	=5200*5.64
Factory overhead	1352	=5200*0.26
Total	38688
b
	Actual costs	Standard cost at actual volume (561,600 Bottles)	Cost variance
Manufacturing costs:
Direct labor	8476	8648.64	-172.64
Direct materials	30914	31674.24	-760.24
Factory overhead	1475	1460.16	14.84
Total Manufacturing cost	40865	41783.04	-918.04
c
The company's actual costs were $918.04 less than budgeted. Favorable direct labor and direct material cost variances more than offset a small unfavorable factory overhead cost variance.