Question

Practice Exam 3 Cost Accounting XYZ Company manufactures and sells patio chairs. For the year 2016, XYZ prepared its master budget on the basis of 4,000 units produced and sold. However, in 2016, because of acute competition in the industry, XYZ was only able to produce and sell 3,000 units. Table 1 provides XYZ Company's static budget and actual results using a contribution margin income statement. Table 1 Flexible-Budget Variances (2) (1)-(3) Sales Volume Variances (4)=(3)-(5) Flexible Budget (3) Actual Results (1) 3,000 $ 225,000 Static Budget (5) 4,000 200,000 Units Sold Revenues Variable Costs Direct Materials Direct Manufacturing Labor Variable Manufacturing Overhead Total Variable Costs Total Contribution Margin Fixed Manufacturing Overhead Operating Income 19,000 7,344 30,000 56,344 168,656 20,000 148,656 24,000 9,600 10,000 43,600 156,400 16,000 140,400 $ $ $ $ To support the preparation of the static budget, the following budgeted (standards) information has been used. Table 2: Standards Selling price per unit Direct Materials cost per unit of product Standard quantity of direct material per unit of product Standard cost per unit of direct materials 50.00 per unit 6.00 per unit 0.3 Lbs $20 per Lbs Direct Manufacturing Labor cost per unit of product Standard quantity of direct labor per unit of product Standard cost per unit of direct labor 2.40 per unit 0.2 hour 12.00 per hour Variable Manufacturing Overhead per unit Budgeted machine hours allowed per unit of product Budgeted variable overhead cost per unit of input 2.50 per unit 0.25 machine hour 10.00 per machine hour Fixed Manufacturing Overhead per unit Budgeted machine hours allowed per unit of product Budgeted fixed overhead cost per unit of input Budgeted total fixed manufacturing overhead 4.00 per unit 0.25 machine hour 16.00 per machine hour 16,000.00

Answer 1

	Actual budget	Flexible budget variance		Flexible budget	sales volume variance		planning budget
UNITS	3000			3000			4000
revenue	225000	75000	F	150000	50000	U	200000
Variable cost
direct material	19000	1000	U	18000	6000	F	24000
Direct manufacturing labor	7344	144	U	7200	2400	F	9600
variable manufacturing overhead	30000	22500	U	7500	2500	F	10000
Total variable cost	56344	23644	U	32700	10900	F	43600
Total contribution margin	168656	51356	F	117300	39100	U	156400
Fixed manufacturing overhead	20000	8000	U	12000	4000	F	16000
operating income	148656	43356	F	105300	35100	U	140400

Date Page No - - Druct Material Price Variance (SP-AP) XAQ 26 - 19 X 3 unco 39. crro Direct Material Eefficiency variance (Ao-SaxSP = (3.000-4000) x 6 600a I . Direct Labor efficiency Variance = (AH-SH ) X S.R (625 -boox 12 25 x 12 = 3co - Direct Labour Price Variance (AR S.R) AH = (11-75-12.00) 625 156-25 u Variable manufacturing OH Spending Variance - AMX SR - Actual OH Cost = 4560 X lo - 20000 = 15000 Variable Aranufacturing on efficiency variance AH XSR - SHASR - = 45000 lu - 750 Xlo.