Question

updated 021119 TIDEWATER WRENCH COMPANY, LLC TRACKING COST VARIANCES & SALES VARIANCES INITIAL BUDGET INFORMATION Our initial plan was to make and sell 500 wrenches. We budgeted 2 lbs. of steel for each wrench, and expected to pay $1.50 per pound for the steel. We budgeted $20 per hour for labor, and expected it to take 3 hours to make each tool. Our initial plan was to sell the 500 wrenches for $120 each. We budgeted $8000 for insurance (fixed overhead), and we decided to use labor hours as the driver for allocating utilities costs (variable overhead). We expected to have $12,000 in utilities costs. ACTUAL RESULTS (1) We receive an order for 550 units at $125.00 each - (2) We purchase 1,400 lbs. of materials., paying 1,960.00, or $1.40 per lb. (3) We drawdown 1250 lbs. materials to produce 550 wrenches. (4) We drawdown (pay) $21.00 hr. for 1640 hours of labor to produce the 550 wrenches. (5) We incur variable overhead expenses (ex. - utilities) of $11,890.00. Variable overhead is applied using the budgeted Var. OH application rate. (6) Fixed overhead (insurance costs are $7,800. Fixed overhead is deemed to be a period expense. (7) We sell all 550 units at $125 each. : PART ONE: Required (use formatted statements shown on Sheet 2 of this EXCEL file) Prepare in good order in the space provided) a Master Budget Income Statement. - Prepare in good order in the space provided) a Flexible Budget Income Statement, based on actual production. • Prepare in good order (in the space provided)an Actual Results Income Statement

Answer 1

Answer with working notes is given below

Master Budget Income Statement Detail 500 wrenches at $120 each Summary $60,000 Revenue COGS Materials (500*2 lbs*$1.5 per lbs) Labor (500*3 labor hours *$20) Variable OH ($12,000/1500) $8 per labor hour Total Var. Contr. Margin Less: Fixed OH Insurance cost Net Income $1,500 $30,000 $12,000 $43,500 $16,500 $8,000 $8,500 Flexible Budget Income Statement Detail 550 wrenches at $120 each Summary $66,000 Revenue COGS Materials (550*2 lbs $1.5 per lbs) Labor (550*3 labor hours *$20) Variable OH ($8 per labor hour for 1650 labor hours) Total Var. Contr. Margin Less: Fixed OH Insurance cost Net Income $1,650 $33,000 $13,200 $47,850 $18,150 $8,000 $10,150 Actual Results Detail 550 units at $125 per unit Summary $68,750 Revenue COGS Materials (1,250 lbs at $1.40 per lbs Labor 1,640 hours at $21 per hour Variable OH Total Var. Contr. Margin Less: Fixed OH Insurance cost Net Income $1,750 $34,440 $11,890 $48,080 $20,670 $7,800 $12,870