Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company

image text in transcribed
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100.000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials (2 pounds @ $4) $ 8 Direct labor (0.5 hours @ $24) 12 Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $7,238 Less variable costs Direct materials 748 Direct labor 1,010 Variable overhead 930 Total variable costs $2,688 Contribution margin $4,550 Less fixed costs Fixed manufacturing overhead 1,050 Nonmanufacturing costs 1,230 Total fixed costs $2.280 Operating profit $2,270

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk-Based Internal Audit

Authors: Jason Lee Mefford

1st Edition

1631922629, 9781631922626

More Books

Students also viewed these Accounting questions

Question

2. In what way can we say that method affects the result we get?

Answered: 1 week ago