McAlisters Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

Standard Cost per 100

Cost Category ...... Two-Liter Bottles

Direct labor ........ $2.75

Direct materials ........ 1.20

Factory overhead ...... 0.35

Total ........... $4.30

At the beginning of May, McAlisters Bottle’s management planned to produce 800,000 bottles. The actual number of bottles produced for May was 750,000 bottles. The actual costs for May of the current year were as follows:

Actual Cost for the Month

Cost Category ....... Ended May 31, 2012

Direct labor ........... $21,100

Direct materials ......... 9,200

Factory overhead ......... 2,700

Total .............. $33,000

a. Prepare the May manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for McAlisters Bottle Company, 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 May.

c. Interpret the budget performance report.