Question
Please help with the answer to this question by providing step by step solution. Thank you in advance. Standard Cost and Flexible Budget. Brier Company
Please help with the answer to this question by providing step by step solution. Thank you in advance.
Standard Cost and Flexible Budget. Brier Company produces car covers. The companys master budget shows the following standards information.
Expected production for September | 5,000 units |
Direct materials | 8 yards per unit at $5 per yard |
Direct labor | 3 hours per unit at $16 per hour |
Variable manufacturing overhead | 3 direct labor hours per unit at $2 per hour |
Required:
a) Calculate the standard cost per unit for direct materials, direct labor, and variable manufacturing overhead using the format shown in Figure 10.1.
b) Assume Brier Company produced 5,100 car covers during the month of September. Prepare a flexible budget for direct materials, direct labor, and variable manufacturing overhead using the format shown in Figure 10.2.
Figure 10.1
Figure 10.2
Figure 10.1 Standard Costs at Jerry's Ice Cream *Direct materials standards come from the direct materials purchases budget presented in Chapter 9 "Ho w Are Operating Budgets Created?". **Direct labor standards come from the direct labor budget presented in Chapter 9. Variable overhead costs are applied to products based on direct labor hours. Variable overhead cost per direct labor hour is calculated by dividing total variable overhead costs of $100,200 (from the manufacturing overhead budget in Chapter 9) by 20,040 total direct labor hours (from the direct labor budget in Chapter 9), which results in a standard variable overhead rate of $5 per direct labor hour. Standard Cost Per Unit Direct materials (2 pounds per unit at $1 per pound)* Direct labor (0.10 hours at $13 per hour)** Variable overhead (0.10 direct labor hours** at $5 per hour) Standard variable production cost per unit $2.00 1.30 0.50 $3.80 Figure 10.2 Flexible Budget for Variable Production Costs at Jerry's Ice Cream Flexible Budget at 210,000 Units Direct materials ($2.00 per unit x 210,000 units) Direct labor ($1.30 per unit x 210,000 units) Variable overhead ($0.50 per unit x 210,000 units) Total budgeted variable production costs at 210,000 units $420,000 273,000 105,000 $798,000 The standard cost presented in Figure 10.1 shows the variable production costs expected to produce one unit. The flexible budget in Figure 10.2 uses the standard cost information to show the variable production costs expected in total given a certain level of activity (210,000 units in this example). Later in the chapter, we compare the flexible budget presented in Figure 10.2 to actual results and analyze the difference. The flexible budget graph presented in Figure 10.3 shows that direct materials have the highest variable production cost at $420,000, followed by direct labor at $273,000 and variable overhead at $105,000Step by Step Solution
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