Question

P23-31B (similar to) budget and a standard cost system White allocaties overhead based on yards of direct The company's performance reportedades the following selected data White Recliners manufactures the recensind se Click the icon to view the selected data) Read the rent Requirement 1. Prepare a feble budget based on the actual number of rediners sold round budget amounts per unit to the nearest cont.) White Recliners Flexible del Sales Revue Vari a ntacturing Costs Direct Materal Dired labor Variable Overhead Fored Matching Cost Ford Overhead Total Cost of Goods Sold 1 Prepare a flexible but based on the actual number of reinors sold Compute the cost anance and the variance for direct materials and for director Formaturgov c omote the variable overhead cost variable ave c food overhead cost and forced overhead volume variances Round to the nearest dollar 3. Have Whites managers done a good job or a poor controling material and overhead cos? Why? 4 Describe how Wh o can be to the standard costing Pole Dane Enter any number in the edit fields and then click Check Answer 6 fanining Check Ano

Answer 1

1.

While Recliners Flexible Budget
	Budget Amounts per Unit
Actual Units ( Recliners )		1005
Budgeted Sales Revenue	$ 510	$ 512,550
Variable Manufacturing Costs
Direct Materials	$ 51	51,255
Direct Labor	94	94,470
Variable Overhead	30.6	30,753
Fixed Manufacturing Costs
Fixed Overhead		62,730
Total Cost of Goods Sold		239,208
Budgeted Gross Profit		$ 273,342

2. Direct materials cost variance = $ 51,255 - $ 52,290 = $ 1,035 U

Direct materials price variance = $ ( 8.50 - 8.30 ) * 6,300 yards = $ 1,260 F

Direct materials efficiency variance = ( 6 x 1005 - 6,300 ) * $ 8.50 = $ 2,295 U

Direct labor cost variance = $ 94,470 - $ 93,575 = $ 895 F

Direct labor rate variance = $ ( 9.40 - 9.50 ) * 9,850 DLH = $ 985 U

Direct labor efficiency variance = ( 10,050 - 9,850) * $ 9.40 = $ 1,880 F

Variable overhead cost variance = $ 30,753 - $ 40,950 = $ 10,197 U

Variable overhead rate variance = $ ( 5.10 - 6.50) * 6,300 = $ 8,820 U

Variable overhead efficiency variance = ( 6,030 - 6,300) * $ 5.10 = $ 1,377 U

3. The managers have not done a good job controlling diirect materials or overhead costs. However, they have done a fair job as far as overall direct labor costs are concerned, though direct labor rate variance is unfavorable, direct labor efficiency variance is favorable.

4. The managers can use the standard costing system by computing the actual costs and comparing them against the standard costs in order to arrive at the variances. All significant variances should be looked into and the originating causes should be established. Corrective action should be taken to minimize the variances.