Can you please explain in detail how to find the ap, aq, sp, and sq? Also, on explanation a, for flexible budget, where did the $2 * 4 come from?
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. During the year, the company purchased 176,000 pounds of material and employed 40,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) The first step is to determine the actual quantity sold. The standard variable overhead per unit is $10(=0.5 hours $20 per hour). The standard total variable cost for a unit is $30 (= $8 direct material + $12 direct labor +$10 variable overhead). Therefore, the standard contribution margin is $45 per unit (= $75 sales price $30 standard variable costs). The sales activity variance was $270,000 unfavorable, so the company must have sold 6,000 units (=$270,000$45 ) fewer than the master budget level of 100,000 . Actual sales volume was 94,000 units (=100,0006,000). a. Direct materials: Actual costs =(APAQ)=$748,000 Actual inputs at standard price =(SPAQ)=$4176,000=$704,000 Flexible budget (standard inputs allowed for good output) =(SPSQ)=$24lbs94,000=$752,000 Price variance =$748,000$704,000=$44,000U Efficiency variance =$704,000$752,000=$48,000F b. Direct labor: Actual costs =(APAQ)=$1,010,000 Actual inputs at standard price =(SPAQ)=$24.0040,400=$969,600 Flexible budget (standard inputs allowed for good output) =(SPSQ)=$24.000.5hrs94,000=$1,128,000 Price variance =$1,010,000$969,600=$40,400U Efficiency variance =$969,600$1,128,000=$158,400F c. Variable overhead: Actual costs =(APAQ)=$930,000 Actual inputs at standard price =(SPAQ)=$2040,400=$808,000 Flexible budget (standard inputs allowed for good output) =(SPSQ)=$200.5hrs94,000=$940,000 Price variance =$930,000$808,000=$122,000U Efficiency variance =$808,000$940,000=$132,000F Direct Material Cost Variance \begin{tabular}{lllll} \multicolumn{2}{c}{ Actual Cost } & \multicolumn{3}{c}{ Standard cost for actual quantity } \\ \hline AQ & AP= & AQ & & SP= \\ \hline 176000$4.25$7,48,000.00 & 176000 & $4.00 & $7,04,000.00 \end{tabular} Standard Cost SQSP= 188000$4.00$7,52,000.00
