Total sales were $2,340,000 for 30,000 units. Management failed to be able to buy enough direct materials to produce the required units for ending inventory nor to keep the required direct materials on hand for ending inventory requirements due to a shortage of WHAM during the quarter.

Total Production for the 3rd quarter was 30,000 units. Vaughan uses the LIFO inventory method. Regarding WHAM, Vaughan purchased and used 18,100 pounds at a total cost of $239,010. Vaughan used 60,500DLH (direct labor hours) to make the 30,000 units at a total labor cost of $895,400. The actual Variable FOH was $121,000 and actual Fixed FOH was $21,000.

Even though Production ended up being 30,000 units, the cash borrowings indicated by the static budget dictated that Vaughan borrow money ($174,000) on the last day of August and they did so. They also paid it back at the end of September as budgeted.

Selling and Administrative expenses totaled $303,800. $206,800 was variable and the rest was fixed. We have not covered S&A variances, but nevertheless, the difference between what actually occurred and what should have happened (the flexible budget) can still be illuminating.

(a) standard cost card for a widget.

(b) flexible budget performance report comparing actual production/sales to a flexible budget of such sales/costs

(c) the direct material variances (price and efficiency/quantity) for each material

(d) the direct labor variances (price/rate and efficiency)

(e) the Variable (spending & efficiency) and Fixed FOH (budget/spending & volume) variances. (refer to the appendix for the factory overhead variances)

f) What should management be looking into for further investigation?

(g) Do you think they should have waited until the end of the quarter to analyze the differences between actual results and planned results? Why or why not?

h) Is FOH over or underapplied? And by how much? Draw a T-account and show FOH.

Flexible Budget and Standard Cost Project Standard Cost Card Quantity Cost Total Direct Material WHAM Total Cost Actual Flexible Production Bud pot Budget and Salma Units Salim Variable Costs: Dinet Material WHAM Link't Labsar Variable FOH Intent Expens Mominbution Margin Find Costs - FOH Dratrating Incomm Price Totals Price Efficiency Total Dinet Labs Price/Kale Totals Price Efficiency Total Variable FOH Spinaling Totals Spending Efficiency Total Find FOH Budget/SpinsEnt F. What should management be looking into for further imesligation? Do you think they should have waited until the end of the year to analyze the dillinings between actual moults and planned would? Why or why not? h. Is FOH over or underapplied? And by how much? Draw a T-account and show FOH Does your answer match with the driver you calculated for Variable and Fixed FOH variances? FOH VFOH Spending VIOH Efficiency FFOH SpendingFFOH Volume Inserted for reference: Master Budget Sales Budget Vaughan Company Sales Budget Total 3rd Quarter July August September Ard Quarter Sales in Units 4,000 20,000 12,000 36,000 Selling Price per Unit X 80 X 80 X 80 X 80 Total Sales in $ 320,000 1,600,000 960,000 2,880,000 Vaughan Company RM Budget Total 3rd Quarter July August September ard Quarter Required Production 5,600 19,200 11,200 36,000 RM per Unit X 0.6 X 0.6 X 0.6 X 0.6 Production Needs 3,360 11,520 6,720 21,600 Add: Desired End Inventory 1,608 2.688 1,008 1,008 Total Needs 7,968 14,208 7,728 22,608 Less: Beginning Inventory (1,344) (4,608) (2,688 (1,344) RM to be Purchased 6.624 9,600 5,040 21,264 Cost of RM per pound X $12.00 X $12.00 X $12 00 X $12.00 Cost of RM to be Purchased 79,488 115,200 60,480 255,168 Vaughan Company DL Budget Total 3rd Quarter July August September and Quarter Budgeted Production in Units 5,600 19,200 11,200 36,000 DLH per Unit X 2 X 2 X 2 X2 Total DI.H needed 11,200 38/400 22,400 72,000 Cost per DL.H X 15 X 15 X 15 X 15 Total Direct Labor Cost 168,000 576,000 336,000 1,080,000 Vaughan Company FOH Budget Total 3rd Quarter July August September And Quarter Budgeted DLH 11,200 38,400 22,400 72,000 Variable FOH rate X $2 X $2 X $2 X $2 Total Variable FOH 22,400 76,800 14,800 144,000 Fixed FOH 7,200 7,200 7,200 21,600 Total FOH 29,600 84,000 52,000 165,600 Less: Depreciation (5,000) 5,000) 5,000) 15,000) Cash Needed for FOH 24,600 79,000 17,000 150,600 Total FOH per Budget 165,600 Budgeted DLH this period 72,000 Predetermined FOH per DLH S 2.30Vaughan Company 5&A Budget Total ard Quarter July August September and Quarter Budgeted Sales in units 4,000 20,000 12,000 36,000 Variable 5&A Expenses X $7.00 X $7.00 X $7.00 X $7.00 Budgeted Variable S&A Exp. 28,000 140,000 84,000 252,000 Budgeted Fixed S&A 32,000 32,000 32,000 96,000 Total Selling & Admin. 60,DO0 172,000 116,000 348,000 Legs: Depreciation 3,000) 3,000) (3,000) 9,000 Less: Bad Debt Expense 16,000) 80,000) (48,000) 144,000) Budgeted Cash 5&A Expenses 11,DO0 89,000 65,000 195,000 Cash Budget Vaughan Company Cash Budget 3rd Quarter July August September Beginning Cash Balance 50,000 168,573 50,515 Add: Cash Receipts 424,000 560,000 1,392,000 Total Cash Available 474,000 728,573 1,442,515 Less: Disbursements Direct Materials WHAM 71 827 108.058 71,424 Direct Labor 168.000 576,000 336,000 FOH 24,600 79,000 17,000 S&A Expenses 41,000 89,000 65,000 Total Disbursements 305,427 352 058 519,424 Cash Balance (Deficit) 168,573 (123/485) 123,091 Borrowings 174,000 RePayments (174,000) Interest 2,610) Ending Cash Balance 168,573 50,515 746,481 Vaughan Company Budgeted Income Statement Total 3rd Quarter July August September And Quarter Sales 320,000 1,600,000 960,000 2,880,000 Less: CGS (167,200) 836,000) 501,600 1,504,800) Gross Margin 152 800 764,000 158,400 1,375,200 Less: 5&A Expenses 60,000) (172,000) (116,000) 348,000) Net Operating Income 92 800 592,000 342,400 1,027,200 Less: Interest Expense (2,610) (2,610) Net Income 92 800 592,000 339,790 1,024,590