Root Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Root allocates overhead based on yards of direct materials. The companys

Question

73 users unlocked this solution today!

Root Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Root allocates overhead based on yards of direct materials. The company€™s performance report includes the following selected data:

Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
3. Have Root€™s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Root€™s managers can benefit from the standard cost system.

Static Budget (1,000 recliners) $505,000 Actual Results (980 recliners) Sales (1,000 (980 recliners x $490 each) recliners x $505 each) 480,200 Variable Manufacturing Costs Direct Materials 6,000 yds. 58.70/yard) (6,143 yds. @ $8.50/yard) (10,000 DLHr $9.00/DLHr) (9,600 DLHr $9.10/DLHr) (6,000 yds. $5.00/ yard) (6,143 yds. $6.40/yard) 52,200 52,216 Direct Labon 90,000 87,360 Variable Overhead 30,000 39,315 Fixed Manufacturing Costs: Fixed Overhead Total Cost of Goods Sold Gross Proft 60,000 232,200 272,800 62,000 240,891 $ 239,309