Answer ALL 3 REQUIREMENTS
The Continuum Company believes that their variances have causes beyond the mere components of each variance. Therefore after calculating the variances for the current period, and gathering a few additional facts, the managers sat down and tried to draw the linkages between the variances using a cause and effect diagram. Here is the data the managers collected: Actual costs and Quantities: Budgeted number of computers to be produced and sold 10,000 Standard Cost per unit: Direct Material 2 lbs. per unit $ 5 per lb $10.00 per unit Direct Labor 0.02 hrs. per unit $ 30 per hr. $0.60 per unit Variable Overhead 1.5 MH per unit $ 5 per hr. $7.50 per unit Fixed Overhead 1.5 MH per unit $10 per hr. $15.00 per unit $33.10 "Based on production of 10,000 units Budgeted Sales in Units 10,000 units Actual Sales in Units 11,000 units Budgeted Sales Price $125 There were no beginning or ending inventoried of raw materials. The actual number of units produced was 11,000 units. The actual costs for the year were the following: Actual Sales Price $122.50 per unit Direct Material Pur and Used 16,000 lbs. at $ 5.08 per lb. $ 81,280 Direct Labor 199.00 hrs. at $ 31.00 per hr. $ 6,169.00 Variable Overhead 14,920 Machine Hours $ 77,300 Fixed Overhead $ 151,200 Budgeted & Actual Variable Sales Commission 10% of Sales Price Budgeted Fixed Selling & Administration $350,000 Actual Fixed Selling and Administration $352,000 100,000 Budgeted Market Size units Actual Market Size 88,000 units Additional facts gathered: The Purchasing Agents are evaluated on the total material variance (Actual Cost of Materials Used - (Standard Price X Standard Quantity Allowed)) Sales volume increased this period compared to last period. Production Volume increased to meet the increased demand. Overtime decreased this period. The Direct labor rate variance was $5,000 Unfavorable LAST period. Machines need lubrication based on the machine hours run. Lubricants are an indirect material included in Variable Overhead. Required: 1. Determine the Actual, Flexible and Static Budgets. Include the Flexible Budget Variances and the Sales Volume Variances. 2. Determine as many additional variances as possible, given the data presented. 3. Create a Current Reality Tree cause and effect diagram and explain the relationships between as many of the variances as you can The Continuum Company believes that their variances have causes beyond the mere components of each variance. Therefore after calculating the variances for the current period, and gathering a few additional facts, the managers sat down and tried to draw the linkages between the variances using a cause and effect diagram. Here is the data the managers collected: Actual costs and Quantities: Budgeted number of computers to be produced and sold 10,000 Standard Cost per unit: Direct Material 2 lbs. per unit $ 5 per lb $10.00 per unit Direct Labor 0.02 hrs. per unit $ 30 per hr. $0.60 per unit Variable Overhead 1.5 MH per unit $ 5 per hr. $7.50 per unit Fixed Overhead 1.5 MH per unit $10 per hr. $15.00 per unit $33.10 "Based on production of 10,000 units Budgeted Sales in Units 10,000 units Actual Sales in Units 11,000 units Budgeted Sales Price $125 There were no beginning or ending inventoried of raw materials. The actual number of units produced was 11,000 units. The actual costs for the year were the following: Actual Sales Price $122.50 per unit Direct Material Pur and Used 16,000 lbs. at $ 5.08 per lb. $ 81,280 Direct Labor 199.00 hrs. at $ 31.00 per hr. $ 6,169.00 Variable Overhead 14,920 Machine Hours $ 77,300 Fixed Overhead $ 151,200 Budgeted & Actual Variable Sales Commission 10% of Sales Price Budgeted Fixed Selling & Administration $350,000 Actual Fixed Selling and Administration $352,000 100,000 Budgeted Market Size units Actual Market Size 88,000 units Additional facts gathered: The Purchasing Agents are evaluated on the total material variance (Actual Cost of Materials Used - (Standard Price X Standard Quantity Allowed)) Sales volume increased this period compared to last period. Production Volume increased to meet the increased demand. Overtime decreased this period. The Direct labor rate variance was $5,000 Unfavorable LAST period. Machines need lubrication based on the machine hours run. Lubricants are an indirect material included in Variable Overhead. Required: 1. Determine the Actual, Flexible and Static Budgets. Include the Flexible Budget Variances and the Sales Volume Variances. 2. Determine as many additional variances as possible, given the data presented. 3. Create a Current Reality Tree cause and effect diagram and explain the relationships between as many of the variances as you can
