Question

e Palermo Stary manufactures bust states of famous historical figures. All stats are the samese Each unt requires the same amount of resources. The following information is from the static budget for 2017: m (Click the loon to view the static budget data) Standard quantities, standard prices and standard unit cost follow for direct mananas and direct manufacturing labor Click the icon to view the data) Read the requirements Requirement 1. Calculate the sales volume variance and fexible-budget variance for operating income Begin with the actual result, 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 in the appropriate field. If the variance is zero, do not select a label.) Output units Revenues Direct materiais Direct manufacturing labor Fwd costs Total costs Operating income

Answer 1

Solution:

1.

	Flexible Budget	Actual Budget	Flexible Budget Variance	Static Budget	Sales Volume Variance
Units produced and sold	4,800	4,800	0	6,400	1,600 U
Direct materials	$806,400($168 × 4,800 units)	813,750	$7,350 U	$1,075,200(6,400 units × $168)	$261,450 F
Direct labor	$595,200($124 ×4,800 units)	$585,900	$9,300 F	$793,600(6,400 units × $124)	$207,700 F
Fixed cost	$1,350,000	$1,200,000	$150,000 F	$1,350,000	$150,000 F
Total cost	$2,751,600	$2,599,650	$151,950 F	$3,218,800	$619,150 F

	Flexible Budget	Actual	Flexible Budget Variance	Static Budget	Static volume variance
Units produced and sold	4,800	4,800	0	6,400	$1600 U
Sales Revenue	$3,600,000($750 ×4, 800 units)	$3,792,000($790 × 4,800 units)	$192,000 F	$4,800,000	$1,008,000 U
Cost of goods sold	$2,751,600	$2,599,650	$151,950 F	$3,218,800	$619,150 F
Operating Income	$848,400	$1,192,350	$343,950 F	$1,581,200	$388,850 U

2.)

Direct material price variance = purchase quantity ×( actual price - standard price)

= 62,500 × ($13.02 - $12.00)

=62,500 ×$1.02 =$63,750 U

Direct materials quantity variance = standard price × (actual quantity - standard quantity given actual output)

$12 × ((62,500 -(14 pounds×4800 units))

$12 × (62,500 - 67,200)

$12 ×4,700 =$56,400 F

Direct labor rate variance = actual hours × ( actual rate - standard rate)

=17,500 × ($33.48 - $40.00)

=17,500 ×$6.52

=$114,100 F

Direct labor efficiency variance = standard rate × (actual hours - standard hours given actual output)

=$40 × ((17500 -(3.1 hours × 4800 units))

$40 × (17,500 -14,880)

$40 ×2,620

=$104,800 U