From 23-31B in Horngren's Financial and Managerial Accounting SIXTH Edition:

Part 1- Prepare a flexible budget based on the actual number of recliners sold.

Part 2- Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.

Part 3- Have McKnight's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?

Part 4- Describe how McKinght's managers can benefit from the standard cost system.

Static Budget Actual Results (1,025 recliners) (1,005 recliners) Sales (1,025 recliners X $500 each) 512,500 (1,005 recliners X $495 each) $ 497,475 Variable Manufacturing Costs: (6,150 yds. @ $8.50/yard) (6,300 yds. @ $8.30/yard) (10,250 DLHr $9.20/DLHr) (9,850 DLHr $9.40/DLHr) (6,150 yds. @ $5.10/yard) (6,300 yds. @ $6.50/yard) Direct Materials 52,275 52,290 Direct Labor 94,300 92,590 Variable Overhead 31,365 40,950 Fixed Manufacturing Costs: Fixed Overhead Total Cost of Goods Sold Gross Profit 62,730 240,670 $271,830 64,730 250,560 $246,915