Exercise 7-16 (Algorithmic)

Cost control evaluation

HardHead makes precast concrete steps for use with manufactured housing. The company had the following 2013 budget based on expected production of 6,800 units:

	Standard Cost	Amount Budgeted
Direct material	$21.15	$143,820
Direct labor	11.60	78,880
Variable overhead
Indirect material	4.35	29,580
Indirect labor	1.90	12,920
Utilities	1.20	8,160
Fixed overhead
Supervisory salaries		85,340
Depreciation		30,940
Insurance		23,460
Total		$413,100

Cost per unit = $413,100 6,800 = $60.75

Actual production for 2013 was 7,600 units, and actual costs for the year were as follows:

Direct material used	$168,340
Direct labor	88,540
Variable overhead
Indirect material	31,160
Indirect labor	15,808
Utilities	10,184
Fixed overhead
Supervisory salaries	87,392
Depreciation	30,940
Insurance	21,560
Total	$453,924

Cost per unit = $453,924 7,600 = $59.73

The plant manager, Tanzi Palate, whose annual bonus includes (among other factors) 20 percent of the net favorable cost variances, states that he saved the company $7,752 [($60.75 - $59.73) X 7,600]. He has instructed the plant cost accountant to prepare a detailed report to be sent to corporate headquarters comparing each component's actual per-unit cost with the per-unit amounts in the preceding annual budget to prove the $7,752 cost savings.

a. Is the actual-to-budget comparison proposed by Palate appropriate? --Inappropriate Correct

If his comparison is not appropriate, prepare a more appropriate comparison. In the Variance column, enter a "U" for an unfavorable variance or an "F" for a favorable variance and if no variance use "NA". If an amount is zero, enter "0".

b. How would you, as the plant cost accountant, react if Palate insisted on his comparison? Suggest what alternatives are available to you.

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I need help with the second part of part A and with Part B. The number I have in the Blue column under Actual is WRONG, but all the labels to the left of it are CORRECT.

Thanks in Advance

his comparison is not appropriate, prepare a more appropriate comparison. In the variance column, enter a 'U' tor an unfavorable variance or an tor a tavorable vanance and IT variance use "NA". If an amount is zero, enter " HardHead Concrete Actual Busdgi Variance Direct Material 143820$ Direct Labor Variable OH Indirect Material Indirect Labor Utilities Fixed OH Supervisory Salaries Depreciation Insurance Totals