The following budgeted and actual volume and cost data are forJuly of this year.
Prepare a flexible budget analysis for July of this year byfilling in the Flexible budget amounts based on the actual salesvolume and calculating the variances. DONâT FORGET TOINDICATE WHETHER THEY ARE FAVORABLE OR UNFAVORABLE!
Budget (per unit)
Budget
Actual
FLEXIBLE BUDGET
Variance
Volume
40,000
40,000
36,000
36,000
Sales Revenue
$70 per unit
$2,800,000
$2,520,000
Budgeted manufacturing costs:
Variable costs:
Direct materials
$35.00
$1,400,000
$1,350,000
Direct labor
15.00
600,000
580,000
Overhead
5.00
200,000
180,000
Total fixed overhead costs
$450,000
450,000
406,000
Net Income before taxes
$150,000
4,000
The following budgeted and actual volume and cost data are forJuly of this year.
Prepare a flexible budget analysis for July of this year byfilling in the Flexible budget amounts based on the actual salesvolume and calculating the variances. DONâT FORGET TOINDICATE WHETHER THEY ARE FAVORABLE OR UNFAVORABLE!
Budget (per unit) | Budget | Actual | FLEXIBLE BUDGET | Variance | ||
Volume | 40,000 | 40,000 | 36,000 | 36,000 | ||
Sales Revenue | $70 per unit | $2,800,000 | $2,520,000 | |||
Budgeted manufacturing costs: | ||||||
Variable costs: | ||||||
Direct materials | $35.00 | $1,400,000 | $1,350,000 | |||
Direct labor | 15.00 | 600,000 | 580,000 | |||
Overhead | 5.00 | 200,000 | 180,000 | |||
Total fixed overhead costs | $450,000 | 450,000 | 406,000 | |||
Net Income before taxes | $150,000 | 4,000 | ||||
Related questions
1. Tommy's Toys produces two types of toys: trains and dolls.Tommy's uses stainless steel to manufacture the trains and plasticto manufacture the dolls. Information regarding the usage of steeland plastic for the past year follows:
Product Names | Steel | Plastic |
Direct materials information | ||
Standard pounds per unit | 2 lb. | 1.0 lb. |
Standard Price (SP) per pound | $3.00 | ? |
Actual Quantity (AQ) used per unit | 3.0 lb. | 3.00 lb. |
Actual Price (AP) paid for material | $1.75 | $2.25 |
Actual Quantity Purchased (AQP) and used | 2,800 lb. | 800 lb. |
Price variance | ? | $1,200 F |
Quantity variance | $900 U | ? |
Flexible budget variance | ? | $412 F |
Number of units produced | 300 | 525 |
What is the direct materials flexible budget variance for steelused to manufacture the trains?
| A. $4,400 favorable | |
| B. $2,600 unfavorable | |
| C. $2,600 favorable | |
| D. $4,400 unfavorable |
2. Sparky the Electrician specializes in rewiring historichouses. Sparky recently purchased a new wire-pulling device thatwill decrease the time needed to complete each job and increasetotal revenues. The device will cost $5,577 and will increase netcash flows by $1,690 per year. The new device has a useful life of7 years and a residual value of $0. What is the payback period forthe new wire-pulling device?
| A. 3.12 years | |
| B. 2.80 years | |
| C. 3.48 years | |
| D. 3.30 years |
3. Sharon Corporation collects 10% in the second month followingsale, 40% in the month following sale, and 40% of a month's salesin the month of sale. The company has found that 10% of their salesare uncollectible. Budgeted sales for the upcoming four monthsare:
August budgeted sales | $280,000 |
September budgeted sales | $350,000 |
October budgeted sales | $380,000 |
November budgeted sales | $240,000 |
The amount of cash that will be collected in November isbudgeted to be
| A. $316,000 | |
| B. $96,000 | |
| C. $283,000 | |
| D. $216,000 |
4. Suppose Whole Foods is considering investing inwarehouse-management software that costs $900,000; has $40,000residual value; and should lead to cash cost savings of $180,000per year for its 5-year life. In calculating the ARR, which of thefollowing figures should be used as the equation's denominator?
| A.$220,000 | |||||||||
| B. $180,000 | |||||||||
| C. $40,000 | |||||||||
| D. $900,000 5. All of the following budgets are prepared by merchandisingcompanies except
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6. The Stallard Corporation manufactures Product X that consumesa large amount of overhead. For the month of October, Stallardproduced 14,200 units of Product X and incurred actual overheadcosts of $269,000. The standard costs developed for Product X byStallard follow:
Standard direct labor hours per unit | 4 |
Standard direct labor rate per hour | $11.00 |
Standard overhead hours per unit | 8 |
Standard overhead rate per hour | $4.80 |
What was the total variable overhead variance for Product X inOctober?
| $276,280 favorable | |
| $200,840 favorable | |
| $276,280 unfavorable | |
| $200,840 unfavorable |
âWonderful! Not only did our salespeople do a good job inmeeting the sales budget this year, but our production people did agood job in controlling costs as well,â said Kim Clark, presidentof Martell Company. âOur $42,400 overall manufacturing costvariance is only 4% of the $1,536,000 standard cost of productsmade during the year. Thatâs well within the 3% parameter set bymanagement for acceptable variances. It looks like everyone will bein line for a bonus this year.â |
| The company produces and sells a single product. The standardcost card for the product follows:
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1. The following data relate to Logan Electric and its LightbulbDivision.
Lightbulb Division sales | $8,500,000 |
Lightbulb Division operating income | $510,000 |
Lightbulb Division total assets | $2,500,000 |
Lightbulb Division current liabilities | $560,000 |
Corporate target rate of return | 16% |
Corporate weighted average cost of capital | 13% |
Corporate effective tax rate | 45% |
What is the Lightbulb Division's capital turnover?
| A. 3.4 | |
| B. 4.5 | |
| C. 16.7 | |
| D. 4.9 |
2. A favorable direct labor efficiency variance might indicatethat
| A. higher skilled workers were usedthat performed the task faster than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. higher skilled workers were usedthat performed the task slower than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. lower skilled workers were paida higher wage than expected. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D. lower skilled workers were paid a lower wage thanexpected. 3. Mockingbird Company expects to sell 5,100 bird perches inJanuary and 9,000 in February for $3 each. What will be the totalsales revenue reflected in the sales budget for those months?
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