Morton Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Morton allocates overhead based on yards of direct materials. The company's performance report includes the following selected data: FB: (Click the icon to view the selected data.) ) Requirements -X Read the requirements Requirement 1. Prepare a flexible budget based on the actual number of recliners sold. (Round budg Morton Recliners Flexible Budget Budget Amounts 1 1. Prepare a flexible budget based on the actual number of recliners sold 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. 3. Have Morton's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why? 4. Describe how Morton's managers can benefit from the standard costing system per Unit Actual Units (Recliners) - Data Table Sales Revenue Variable Manufacturing Costs: Direct Materials Direct Labor Variable Overhead Fixed Manufacturing Costs: Static Budget Actual Results (1,000 recliners) (980 recliners) $ 505.000 S 470.400 Fixed Overhead 51,600 Total Cost of Goods Sold 51.601 Gross Profit Sales (1.000 recliners x $505 each) (980 recliners x $480 each) ) Variable Manufacturing Costs: Direct Materials (6.000 yds. @ 58.80 / yd.) (6.143 yds @ $8.40 / yd.) Direct Labor (10,000 DLHr@ 59.20 / DLHR) (9.600 DLHr @ 9.30 / DLH) Variable Overhead (6.000 yds. @ $5.20 / yd.) (6.143 yds @ $6.60 / yd.) Fixed Manufacturing Costs 92.000 89.280 31,200 40.544 Enter any number in the edit fields and then click Check Ansy 60.600 62.600 Fixed Overhead ? 244,025 Total Cost of Goods Sold 6 parts 235.400 269,600 $ Check Answer 1 remaining $ Gross Profit 228.375 Requirement 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. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost: AQ = actual quantity: FOH = fixed overhead: SC = standard cost: SQ = standard quantity.) Variance Direct materials cost variance Formula (AC-SC) XAQ (AC-SC) XAQ Direct labor cost variance S Next compute the efficiency variances. Select the required formulas, compute the efficiency variances for direct materials and direct labor and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost AQ = actual quantity: FOH = fixed overhead: SC = standard cost: SQ = standard quantity.) Formula Variance Direct materials efficiency variance (AQ - SQ) X SC Direct labor efficiency variance (AQ - SQ) x SC Now compute the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost; AQ = actual quantity: FOH = fixed overhead: SC = standard cost: SQ = standard quantity: VOH = variable overhead.) Formula Variance VOH cost variance (AC-SC) XAQ VOH efficiency variance (AQ-SA) SC Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost: AQ = actual quantity: FOH = fixed overhead: SC = standard cost: sa = standard quantity.) Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost: AQ = actual quantity: FOH = fixed overhead: SC = standard cost: SQ = standard quantity.) Variance FOH cost variance = Formula Actual FOH - Budgeted FOH Budgeted FOH - Allocated FOH FOH volume variance Requirement 3. Have Morton's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why? The variances computed in Requirement 2 suggest that the managers have done a reasonable job controlling materials and labor costs. The favorable direct materials cost variance and direct labor efficiency variance help offset the unfavorable direct labor cost variance and direct materials efficiency variance. Managers have done a poor job controlling overhead costs as evidenced by the fact that all of the overhead variances are unfavorable Requirement 4. Describe how Morton's managers can benefit from the standard costing system. Standard costing helps managers do the following: Prepare the master budget Set target levels of performance for flexible budgets Identify performance standards Set sales prices of products and services Decrease accounting costs