I am having challenges with Budget Variance and Labor Materials Variance for my final project. I am not sure if I am on the right track or not.

You are a manager for Peyton Approved, a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient. You will be preparing a budget for the quarter July through September 2014. You are provided the following information. The budgeted balance sheet on June 30, 2014, is: Peyton Approved Budgeted Balance Sheet 30-Jun-15 ASSETS Cash $42,000 Accounts receivable 259,900 Raw materials inventory 35,650 Finished goods inventory 241,080 Total current assets 578,630 Equipment $720,000 Less accumulated depreciation 240,000 480,000 Total assets $1,058,630 LIABILITIES AND EQUITY Accounts payable Short-term notes payable Taxes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $63,400 24,000 10,000 97,400 300,000 397,400 $600,000 61,230 661,230 $1,058,630 All assumptions are new and apply to the July through September budget period. 1. Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product's selling price is $18.00 per unit and its total product cost is $14.35 per unit. 2. The June 30 finished goods inventory is 16,800 units. 3. Going forward, company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. 4. The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements. 5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. 6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed factory overhead. 7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. 8. Sales representatives' commissions are 12% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,750 per month. Specifically, the following critical elements must be addressed when creating an Operating Budget by completing the budget templates found on the "Budgets" tab below. Step 1: Prepare a Sales Budget Complete Part A - Sales Budget on the Budgets tab below by using the information found in the budgeted balance sheet above. Consider assumption 1 when completing this critical element: Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product's selling price is $18.00 per unit and its total product cost is $14.35 per unit. You can find an example of a sales budget in Exhibit 22-5 on page 1324 of the textbook. Step 2: Prepare a Production Budget Complete Part C - Production Budget on the Budgets tab below by using the information found in the budgeted balance sheet above. Consider assumption 1 while completing this critical element: Sales were 20,000 units in June 2015. Forecasted sales in units are as follows: July, 18,000; August, 22,000; September, 20,000; October, 24,000. The product's selling price is $18.00 per unit and its total product cost is $14.35 per unit. Consider assumption 2 while completing this critical element: The June 30 finished goods inventory is 16,800 units. Consider assumption 3 while completing this critical element: Going forward, company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. You can find an example of a production budget in Exhibit 22-6 on page 1325 of the textbook. Step 3: Prepare a Manufacturing Budget Complete Part E - Manufacturing Budget on the Budgets tab below by using the information found in the budgeted balance sheet above. The manufacturing budget consists of three parts: the Raw Materials Budget, the Direct Labor Budget, and the Factory Overhead Budget. Raw Material Budget Consider assumption 4 while completing this critical element: The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements. Consider units to be produced found in the production budget while completing this critical element. Direct Labor Budget Consider assumption 5 while completing this critical element: Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. Consider units to be produced found in the production budget while completing this critical element. Factory Overhead Budget Consider assumption 6 while completing this critical element: Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per unit produced. Depreciation of $20,000 per month is treated as fixed factory overhead. Consider units to be produced found in the production budget while completing this critical element. Step 4: Prepare a Selling Budget Complete Part G - Selling Expense Budget. Consider assumption 8 while completing this critical element: 8. Sales representatives' commissions are 12% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,750 per month. Step 5: General and Administrative Expense Budget Complete Part I - General and Admin Expense Budget. Consider assumption 7 while completing this critical element: 7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. Specifically, the following critical elements must be addressed when performing the Budget Variance Analysis using the Budget Variance Student Worksheet The actual quantity of material used was 31,000 with an actual cost of $7.75 per unit. The actual labor hours were 33,000 with an actual rate per hour of $15. Step 1: Complete A. Develop a variance analysis including a Budget Variance performance report and appropriate variances for materials, labor, and overhead. Start with the Labor and Materials Variance tab. Standard costs/quantities come from the raw materials budget and the labor budget. Use Exhibits 23-11 on page 1416 and 23-12 on page 1419 in the textbook as guides. After completing the Labor and Materials Variance tab, transfer variances to the Budget Variance Report tab. Congratulations! You have completed the workbook portion of Final Project Part I. To complete the discussion portion of Final Project Part I, complete the Final Project Part I Student Discussion document. Peyton Approved Sales Budgets July, August, and September 2015 Budgeted Unit Price Budgeted Units Jul-15 Aug-15 Sep-15 18,000 22,000 20,000 Budgeted Total Dollars 18.00 18.00 18.00 Total for the first quarter $324,000 $396,000 $360,000 $1,080,000 Part C - Production Budget Peyton Approved Production Budget July, August, and September 2015 July Next month's budgeted sales August Sept. Total 22,000 20,000 24,000 66,000 70% 70% 70% 70% Budgeted ending inventory 15,400 14,000 16,800 46,200 Add budgeted sales 18,000 22,000 20,000 60,000 Required units to be produced 33,400 36,000 36,800 106,200 -16,800 -15,400 -14,000 -46,200 16,600 20,600 22,800 60,000 Percentage of inventory to future sales Deduct beginning inventory (Previous month ending inventory) Units to be produced Part E - Manufacturing budget - contains raw materials budget, direct labor budget, and factory overhead budget Peyton Approved Raw Materials Budget July, August, and September 2015 July Production budget (units) August Sept. Total 16,600 20,600 22,800 60,000 0.5 0.5 0.5 0.5 Materials needed for production 8,300 10,300 11,400 30,000 Add budgeted ending inventory 2,060 2,280 1,980 6,320 Total materials requirements (units) 10,360 12,580 13,880 36,820 Deduct beginning inventory (previous month ending inventory) -4,600 -2,060 -2,280 -8,940 Materials to be purchased 5,760 10,520 11,100 27,280 Material price per unit 7.75 7.75 ### 7.75 $44,640 $81,530 $86,025 $212,195 Materials requirement per unit Total cost of direct material purchases Peyton Approved Direct Labor Budget July, August, and September 2015 July August Sept. Total 16,600 Total labor hours needed 22,800 60,000 0.5 0.5 0.5 8,300 Labor requirements per unit (hours) 20,600 0.5 Budgeted production (units) 10,300 11,400 30,000 16.00 16.00 ### 16.00 $132,800 $164,800 $182,400 $480,000 Labor rate (per hour) Labor dollars Peyton Approved Factory Overhead Budget July, August, and September 2015 July Budgeted production (units) Variable factory overhead rate Budgeted variable overhead Fixed overhead Budgeted total overhead August Sept. Total 16,600 20,600 22,800 60,000 1.35 1.35 ### 1.35 22,410 27,810 30,780 $81,000 20,000 20,000 20,000 60,000 $42,410 $47,810 $50,780 $141,000 Part G - Selling Expense Budget Peyton Approved Selling Expense Budgets July, August, and September 2015 July Budgeted sales Sales commission percent Sales commissions expense Sales salaries Total selling expenses August Sept. Total $324,000 $396,000 $360,000 $1,080,000 12% 12% 12% 12% 38,880 47,520 43,200 $129,600 3,750 3,750 3,750 11,250 $42,630 $51,270 $46,950 $140,850 Part I - General and Admin Expense Budget Peyton Approved General and Administrative Expense Budgets July, August, and September 2015 July Salaries Interest on long-term note Total expenses August Sept. Total $12,000 $12,000 $12,000 $36,000 2,700 2,700 2,700 8,100 $14,700 $14,700 $14,700 $44,100 Labor variance actual quantity 33,000 495,000 (1) 330000 -33000 actual cost $ 15.00 Labor Cost/Price Variance standard cost $ 16.00 480,000 3,000 16 48000 standard quantity 30,000 Labor Efficiency Variance Materials variance actual quantity 31,000 actual cost $ 7.75 standard cost $ 7.75 240,250 - 980 31000 0 Material Cost/Price Variance 7.75 -7595 Material Efficiency Variance standard quantity 36,320 Peyton Approved Budget Variance Report For the Year Ended ... Actual Results Direct materials variances Cost/price variance Efficiency variance Total direct materials variance $ Direct labor variances Cost /price variance Efficiency variance Total direct labor variance $ 31,000.00 Static Budget 31,980 Variance Favorable/ Unfavorable 7,595 Favorable (7,595) 7,595 15.00 33,000 48,000 15,000 16 15,000 Unfavorable