Static Budget (1,000 recliners) $ 505,000 Actual Results (980 recliners) 465,500 52,200 52,216 Sales (1,000 recliners x $ 505 each) (980 recliners x $ 475 each) Variable Manufacturing Costs: Direct Materials (6,000 yds. @ $ 8.70 / yd.) (6,143 yds. @ $ 8.50 / yd.) Direct Labor (10,000 DLHr@ $ 9.10 / DLHr) (9,600 DLHr @ $ 9.30 / DLHr) Variable Overhead (6,000 yds. @ $ 5.00 / yd.) (6,143 yds. @ $ 6.40 / yd.) Fixed Manufacturing Costs: 91,000 89,280 30,000 39,315 60,000 Fixed Overhead 62,000 Total Cost of Goods Sold 233,200 242,811 271,800 $ 222,689 Gross Profit Requirement 1. Prepare a flexible budget based on the actual number of recliners sold. (Round budget amounts per unit to the nearest cent.) Cole 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 Total Cost of Goods Sold Gross Profit 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.) Formula Variance Direct materials cost variance Direct labor cost variance 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.) Formula Variance = | Direct materials efficiency variance Direct labor efficiency variance 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.) Formula Variance II VOH cost variance VOH efficiency variance = 11 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.) Formula Variance FOH cost variance FOH volume variance = Requirement 3. Have Cole'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 Vjob controlling materials and labor costs. The direct materials cost variance and direct labor efficiency variance help offset the V direct labor cost variance and direct materials efficiency variance. Managers have done a v job controlling overhead costs as evidenced by the fact that of the overhead variances are Requirement 4. Describe how Cole's managers can benefit from the standard costing system. Standard costing helps managers do the following
