ACCT 2102 Chapter Notes - Chapter 8: Negative Number, Fixed Cost, Variable Cost

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2 May 2016

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Master budget is a benchmark against which we evaluate actual performance. Difference between actual results and budgeted amount: favorable variance (f): actual performance is better than budgeted. Costs: actual < budgeted: unfavorable variance (u): actual performance is worse than budgeted. How the difference between the profits arise: sales price, sales volume. Input prices for direct labor and direct materials. Input efficiencies (amount of materials and labor per unit product) Total profit variance: total profit variance = actual profit master budget profit. Then decompose total profit variance into either: sales volume variance, flexible budget variance (all other sources of variances except sales volume) Flexible budget actual sales volume [the only difference from master budget] budgeted sales price (per unit) budgeted fixed costs budgeted unit variable costs: & budgeted input prices and input quantities per unit of output. = flexible budget profit master budget profit or. = (actual sales q budgeted sales q) budgeted unit cm.

Related Questions

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

lemonporpoise268

Crafts Inc., is a manufacturer of furniture.

The company has 2 responsibility centers: Production and Selling and Distribution.

Production and administration are cost centers while Selling and Distribution is a profit center.

Presented below are the budgeted and actual contribution income statement for October along with applicable unit information.

Budgeted unit information:

Direct material per unit

$50

Direct labor per unit

$20

Variable manufacturing overhead per unit

$15

Variable selling and distribution per unit

Actual Units:

1,000

Craft Inc.

Budgeted Contribution Income Statement

Variable cost of goods sold:

Manufacturing overhead

13,500

$ 76,500

Selling and distribution

Manufacturing overhead

40,000

Selling and Distribution

Actual Contribution Income Statement

Variable cost of goods sold:

Manufacturing overhead

20,000

$ 95,000

Selling and distribution

Manufacturing overhead

38,000

Selling and Distribution

1. Prepare a flexible budget performance report for Production that compares actual and allowed costs.

2. Prepare a flexible budget performance report for selling and distribution that compares actual and allowed costs.

3. Determine the revenue variance.

4. Determine the sales price variance.

5. Determine the sales volume variance.

6. Explain to management the areas that should be investigated. You should also include why the actual income is less than budgeted Explain why you picked these areas to look at.

ochrelizard167

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

Cost Category Standard Cost per 100 Two-Liter Bottles
Direct labor $3.00
Direct materials 9.00
Factory overhead 0.60
Total $12.60

At the beginning of July, GBC management planned to produce 385,000 bottles. The actual number of bottles produced for July was 389,000 bottles. The actual costs for July of the current year were as follows:

Cost Category Actual Cost for the Month Ended July 31
Direct labor $11,150
Direct materials 33,819
Factory overhead 2,802
Total $47,771

Required:
A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.
B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
C. Interpret the budget performance report.

A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.

Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended July 31, 2016

1
Manufacturing Costs
Standard Cost at Planned Volume (385,000 Bottles)
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total

B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Genie in a Bottle Company
Budget Performance Report
For the Month Ended July 31, 2016

1
Manufacturing Costs
Actual Costs
Standard Cost at Actual Volume (389,000 Bottles)
Cost Varianceâ(Favorable) Unfavorable
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total manufacturing costs

C. Interpret the budget performance report.
The Company's actual costs were $1,243 budgeted. direct labor and direct material cost variances more than offset a small factory overhead cost variance.

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ACCT 2102 Chapter Notes - Chapter 8: Negative Number, Fixed Cost, Variable Cost

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