Question

Harvin Company's budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attaché case are $37, $9, and $13, respectively. The president is pleased with the following performance report: Actual Costs Static Budget Variance Direct materials 373,000 $ 407,000 $ 34,000 F Direct manufacturing labor 97,200 99,000 1,800 F. Direct marketing (distribution) labor 133,000 143,000 10,000 F Actual output was 9,800 attaché cases. Assume all three direct-cost items above are variable costs. Requirement 1. Is the president's pleasure justified? Prepare a revised performance report that uses a flexible budget and a static budget. Prepare a revised performance report that uses a flexible budget and a static budget. Begin with the actual results, then complete the flexible budget columns and the static budget columns. (Label each variance as favorable (F) or unfavorable (U). For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label.) Actual results Output units Direct materials Direct manufacturing labor Direct marketing labor

Answer 1

	1	2(1-3)		3	4(3-5)		5
	Actual	Flexible Budget			Sales Volume
	Results	Variance		Flexible Budget	Variance		Static Budget
Output units	9,800			9,800			11,000
Direct materials	$3,73,000	$10,400	U	$3,62,600	$44,400	F	$4,07,000
Direct manufacturing labor	$97,200	$9,000	U	$88,200	$10,800	F	$99,000
Direct marketing labor	$1,33,000	$5,600	U	$1,27,400	$15,600	F	$1,43,000
Total Direct labor cost	$6,03,200	$25,000	U	$5,78,200	$70,800	F	$6,49,000