Please help with the following problem M8-1
Preston Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Preston allocates overhead based on yards of direct materials. The company's performance report includes the following selected data: (Click the icon to view the selected data.) Read the requirements. Data table Requirements 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 Preston's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why? 4. Describe how Preston's managers can benefit from the standard costing system. Requirement 1. Prepare a flexible budget based on the actual number of recliners sold. (Round budget amounts per unit to the nearest cent.) Preston Recliners Flexible Budget Budget Amounts per Unit Actual Units (Recliners) Sales Revenue Variable Manufacturing Costs: Direct Materials Direct Labor Variable Overhead Fixed Manufacturing Costs: Fixed Overhead 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.) 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. (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.) 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. 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.) FOH cost variance == FOH volume variance = Requirement 3. Have Preston'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 job controlling materials and labor costs. The direct materials cost variance and direct labor efficiency variance help offset the direct labor cost variance and direct materials efficiency variance. Managers have done a that of the overhead variances are Requirement 4. Describe how Preston's managers can benefit from the standard costing system
