Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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:
Static Budget (1,000 recliners) Actual Results (980 recliners)
Sales (1,000 recliners X $495) $495,000
(980 recliners X $475) $465,500
Variable manufacturing costs:
Direct materials (6,000 yds @ $8.80/yard) 52,800
(6,150 yds @ $8.60/yard) 52,890
Direct labor (10,000 hrs @ $9.20/hour) 92,000
(9,600 hrs @ $9.30/hour) 89,280
Variable overhead (6,000 yds @ $5.00/yard) 30,000
(6,510 yds @ $6.40/yard) 39,360
Fixed manufacturing costs:
Fixed overhead 60,000 62,000
Total cost of goods sold $234,800 $243,530
Gross profit $260,200 $221,970
Requirements:
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the price variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead spending, variable overhead efficiency, fixed overhead spending, and fixed overhead volume variances.
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.

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

Auditory Interfaces

Authors: Stefania Serafin, Bill Buxton, Bill Gaver, Sara Bly

1st Edition

1032196459, 978-1032196459

More Books

Students also viewed these Accounting questions