Question
Pacific Company provides the following information about its budgeted and actual results for June 2014. Although the expected June volume was 25,000 units produced and
Pacific Company provides the following information about its budgeted and actual results for June 2014. Although the expected June volume was 25,000 units produced and sold, the company actually produced and sold 27,000 units as detailed here:
Budgeted 25,000 units | Actual 27,000 units | |
Selling price | $5 | $5.23 |
Variable costs | ||
Direct materials | $1.24 | $1.12 |
Direct labor | $1.50 | $1.40 |
Factory supplies | .25 | .37 |
Utilities | .50 | .60 |
Selling costs | .40 | .34 |
Fixed costs | ||
Depreciation machinery* | $3,750 | $3,710 |
Depreciation building* | 2,500 | 2,500 |
General liability insurance | 1,200 | 1,250 |
Property taxes | 500 | 485 |
Other administrative expense | 750 | 900 |
* Indicates factory overhead item; $ 0.75 per unit or $ 3 per direct labor hour for variable overhead, and $ 0.25 per unit or $ 1 per direct labor hour for fixed overhead.
Standard costs based on expected output of 25,000 units
Per unit output Quantity to be used Total Cost | |||
Direct materials, 4 oz. @ $0.31/oz | $1.24 per unit | 100,000 oz | $31,000 |
Direct labor, .25 hours @ $6 per hour | $1.50 per unit | 6,250 hours | 37,500 |
Overhead | $1.00 per unit | 25,000 |
Actual costs incurred to produce 27,000 units
Per unit output Quantity to be used Total Cost | |||
Direct materials, 4 oz. @ $0.28/oz | $1.12 per unit | 108,000 oz | $30,240 |
Direct labor, .20 hours @ $7 per hour | $1.40 per unit | 5,400 hours | 37,800 |
Overhead | $1.20 per unit | 32,400 |
Standard costs based on expected output of 27,000 units
Per unit output Quantity to be used Total Cost | |||
Direct materials, 4 oz. @ $0.31/oz | $1.24 per unit | 108,000 oz | $33,480 |
Direct labor, .25 hours @ $6 per hour | $1.50 per unit | 6,750 hours | 40,500 |
Overhead | 26,500 |
Required
Prepare June flexible budgets showing expected sales, costs, and net income assuming 20,000, 25,000, and 30,000 units of output produced and sold.
Prepare a flexible budget performance report that compares actual results with the amounts budgeted if the actual volume had been expected.
Apply variance analysis for direct materials and direct labor.
Compute the total overhead variance, and the controllable and volume variances.
Compute spending and efficiency variances for overhead.
Prepare journal entries to record standard costs, and price and quantity variances, for
direct materials, direct labor, and factory overhead.
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