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BA213 Fall 2019 Ramiro Garcia Homework: Chapter 23 Homework Score: 0 of 15 pts 1 of 2 (0 complete) HW Sco P23-26A (similar to) Root Reciners manufactures loather reciners and uses fexble budgeting and a standard cost system Root alocates overhead based on yards of drect materials The company's performance report includes the following selected data (Cick the icon to view the selectod data) Read the reaurements Requirement 1. Prepare a flexible budget based on the achual number of recinors sold (Round budget amounts per unt to the nearest cont) Root Recliners Flexible Budget Budget Amounts per Unit Actual Units (Recliners) Sales Revenue Variable Manulacturing Costs Direct Materials Direct Labor Variable Overhead Fxed Manufacturing Costs Fixed Overhead Tolal Cost of Goods Sold Gross Proft Enter any number in the edit flelds and then click Check Answer. Chea Clear All parts remaining DELL

Answer 1

Root Recliners Flexible Budget: Flexible Budget (980 recliners) Sales (955*480) 4,58,400 Variable manufacturing costs: Direct materials (5,987*8.80) Direct labor (9,350*9.40) Variable overhead (5,987*5.30) 52,686 87,890 31,731 Fixed manufacturing costs: Fixed overhead Total cost of goods sold 60,255 2,32,562 Gross Profit $2,25,838 Amt Favorable (F)/ Unfavorable (U) Part B) Material Price Variance = 5,987*(8.60 - 8.80) $1,197.40 F $2,261.60 U $1,870.00 U $1,880.00 F Material Efficiency Variance = 8.80*(5,987- 5,850/975*955) = Labor Price Variance = 9,350*(9.60 - 9.40) = Labor Efficiency Variance = 9.40*(9,350 - 9,750/975*955) = Variable Overhead Spending Variance = 5,987*(6.70 - 5.30) = Variable Overhead Efficiency Variance = 5.30*(5,987 -5,850/975*955) = Fixed Overhead Spending Variance = $62,255 - $60,255 = Fixed Overhead Volume Variance = $60,255 - $60,255/975* 955 = $8,381.80 U $1,362.10 U $2,000.00 U $1,236.00 U Part C) No, the Root's managers have not done a good job of controlling costs. According to the data, the actual costs are higher than the expected costs, making most of the outcomes UNfavorable. Only favorable variances would be material price and labor efficiency. Part D) Root's managers can benefit from the standard costing system by using variance analysis as a tool for controlling factors which may cause costs to rise above the intended levels. This would improve performance, efficiency and save the company money, which could go towards incentives.