Question
Q6-Comprehensive variance analysis. Pacific Furniture is an elite desk manufacturer. At the start of May 2016, the following budgeted unit amounts (based on a
Q6-Comprehensive variance analysis. Pacific Furniture is an elite desk manufacturer. At the start of May 2016, the following budgeted unit amounts (based on a standard costing system) related to its manufacture of executive desks (made out of oak). Direct materials: 16 square foot 20$ per square foot Direct manufacturing labor 3 hours per desk 30 $ per direct manufacturing labor hour Budgeted production for May 2016 was 700 executive desks. There were no beginning inventories of direct materials or finished goods on May 1, 2016. Work in process is minimal. Actual results for May 2016 are as follows: Direct materials purchased (12,640 square feet) Direct materials used (11,850 square feet) 259,120 $ ? Direct manufacturing labor (2,325 hours at 31.00 $ per hour) ? Actual production in May 2016 is 750 executive desk units. A constant purchase price for oak wood existed in May 2016. REQUIRED: 1. Prepare a detailed flexible-budget variance analysis for May 2016 covering direct materials and direct manufacturing labor. 2. Give two explanations for each of the variances you compute in requirement.
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