ACC 321 Chapters 7 & 8: Handout Problem (Budgeting) "It curtainly is nice to see that small variance on the income state ment after all the trouble we've had lately in controlling manufacturing costs," said Linda White, vice president of Molina Company. The 2,250 variance reported last period is well below the 3% limit we have set for variances. We need to congratulate everybody on a job well done. The income statement to which Ms. White was referring is shown below: 20,000 Units Flexible Budget Variance Actual Costs b) Prepare Level 2 analysis for the plant manager (responsibility accounting) Sales Cost Static Volume Flexible Formula Budget Variance Budget Units produced & sold Manufacturing costs: Variable Direct Mat. $14/unit Variable Direct labor $12/unit Variable mfg. OH $3/unit Fixed Mfg. OH cost $9/unit Total Mfg. costs 2250 Actual Budgeted Verice Sales $1,200,000 $1,200,000 Les cost of goods sold bndard cost, 38 per unit) 752.250 Grow margin... 437,750 40.000 Loss operating expenses Salting expenses 200,000 200. Administrative 150.00 150.000 in operating expenses 350.000 350.000 Net Income. $ 90.000 52.250 The company products and sells a single product. The standard cost card for the product follows: Standard Cost Card-Per Unit Direet materials, 4 yards a $3.50....... 514 Direct labo, 1.5 hours at $8...... 12 Variable overhead, 1.5 hours $2... Fixed overhead, 1.5 hours at $6. Standard cost per unit. . . The following additional information is available for the year just completed: a. The company manufactured and sold 20,000 units of product during the year. b. A total of 78,000 yards of material were purchased during the year cost of 53.75 per yard. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year. C. The company worked 32,500 direct labor-hours during the year at a cost of 57.80 per hour. d. Overhead cost is applied to products on the basis of direct laber-hours. Data relating to Overhead costs follow: Denominato civity level (dit behours) 25.500 hours/15 hours Hudededorehead con from the master budget)................$15.000 Actual fixed overhead costs ........ ...... 148.000 Actual variable overhead 8.250 Chapter 7 Analysis c) Prepare Level 3 analysis for the plant manager Flexible Cost Flexible Budget Formula Budget Variance Manufacturing costs: Variable Direct Mat. $14/unit Variable Direct labor $12/unit Actual Costs Chapter 8 Analysis c) Prepare Level 3 analysis for the plant manager Flexible Cost Flexible Budget Formula Budget Variance Manufacturing costs Variable mfg. OH $3/unit Fixed Mfg. OH cost $9/unit Actual Costs a) Prepare Level 1 analysis for the plant manager (responsibility accounting) Static Cost Static Budget Actual Formula Budget Variance Costs Units produced & sold Manufacturing costs: Variable Mfg. Costs $29/unit Fixed Mfg. OH cost $9/unit Total Mfg. costs Chapter 788 Analysis conclusions d) Discuss the results for the plant manager & is he responsible? Do on the back in a memo
