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 price variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
3. Have Root’s managers done a good job or a poor job controlling materials and labor costs? Why?
4. Describe how Root’s managers can benefit from the standard costing system.

Transcribed Image Text:

Static Budget Actual Results (1,025 recliners) (1,005 recliners) Sales (1,025 recliners x $505) $ (1,005 recliners x $ 485 ) $17,625 $ 487,425 Variable manufacturing costs: Direct materials (6,150 yds @ $8.90) 54,735 (6,300 yds @ $8.70) 54,810 Direct labor (10,250 hrs @ $9.40 ) 96,350 (9,850 hrs @ $9.55 ) 94,068 Variable overhead (6,150 yds @ $5.10 ) 31,365 (6,300 yds @ $6.50 ) 40,950 Fixed manufacturing costs: Fixed overhead Total cost of goods sold Gross profit SA 62,730 64,730 245,180 254,558 272,445 $ 232,867