Sams Bottle Company (SBC) manufactures plastic 2-liter bottles for the beverage industry. The cost standards per 100 2-liter bottles are as follows:
Standard Cost
per 100 2-Liter
Cost Category Bottles
Direct labor ........... $1.26
Direct materials .......... 5.04
Factory overhead ........ 0.35
Total ............. $6.65
At the beginning of July, SBC management planned to produce 600,000 bottles.
The actual number of bottles produced for July was 640,000 bottles. The actual costs for July of the current year were as follows:
Actual Cost for the
Cost Category Month Ended July 31, 2006
Direct labor ............. $ 8,000
Direct materials ............ 32,600
Factory overhead........... 2,500
Total ................. $43,100
a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for SBC, 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.
c. Interpret the budget performance report.