Dawkins Co. assembles PCs and uses flexible budgeting and a standard COS1 system. Dawkins allocates overhead based on the number of direct materials parts. The company's performance report includes the following selected data:

Requirements 

1. Prepare a flexible budget based on the actual number of PCs 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 Dawkins's managers done a good job or a poor job controlling materials and labor costs? Why?

4. Describe how Dawkins's managers can benefit from the standard costing system.

Transcribed Image Text:

Sales (20,000 PCs x $400) (22,000 PCs x $420) Variable manufacturing costs: Direct materials (200,000 parts @ $10.00) (214,200 parts @ $9.80) Static Budget (20,000 PCs) $8,000,000 Actual Results (22,000 PCs) $9,240,000 2,000,000 2,099,160 Direct labor (40,000 hrs. @ $14.00) 560,000 (41,000 hrs. @ $14.60) 598,600 Variable overhead (200,000 parts @ $4.00) 800,000 (214,200 parts @ $4.10) 878,220 Fixed manufacturing costs: Fixed overhead 900,000 930,000 Total cost of goods sold 4,260,000 4,505,980 Gross profit $3,740,000 $4,734,020