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Q3SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 1306

Short Answer

Calculating flexible budget variances

Complete the flexible budget variance analysis by filling in the blanks in the partialflexible budget performance report for 9,000 travel locks for Grant, Inc.

GRANT, INC.

Flexible Budget Performance Report (partial)

For the Month Ended April 30, 2018

ActualResultsFlexible Budget VarianceFlexible Budget
Units 9,000(a)9,000

Sales Revenue

$126,000

(b)

(c)

$108,000

Variable Costs

$52,300

(d)

(e)

$50,300

Contribution Margin

$73,700

(f)

(g)

$57,700

Fixed Costs

$16,100

(h)

(i)

$14,900

Operating Income

$57,600

(j)

(k)

$42,800

Actual operating income is greater than Flexible budgeted operating income by $14,800. It means the flexible budget variances is favourable.

See the step by step solution

Step by Step Solution

Step 1:

A flexible budget variance is the distinction between the outcomes extracted by a flexible budget and actual outcomes.Favorable variances occurs when actual outcome exceed budgeted outcome. Unfavorable variances occurs when actual outcome fall below budgeted outcome.

Step 2:

GRANT, INC.

Flexible Budget Performance Report (partial)

For the Month Ended April 30, 2018

ActualResultsFlexible Budget VarianceFlexible Budget
Units9,00009,000

Sales Revenue

$126,000

$18,000

F

$108,000

Variable Costs

$52,300

$2,000

F

$50,300

Contribution Margin

$73,700

$16,000

F

$57,700

Fixed Costs

$16,100

$1,200

F

$14,900

Operating Income

$57,600

$14,800

F

$42,800

Most popular questions for Business-studies Textbooks

Computing and journalizing standard cost variances

Middleton manufactures coffee mugs that it sells to other companies for customizing with their own logos. Middleton prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month:

Direct Materials (0.2 lbs. @ $0.25 per lb.) $ 0.05

Direct Labor (3 minutes @ $0.14 per minute) 0.42

Manufacturing Overhead:

Variable (3 minutes @ $0.06 per minute) $ 0.18

Fixed (3 minutes @ $0.13 per minute) 0.39 0.57

Total Cost per Coffee Mug $ 1.04

Actual cost and production information for July 2018 follows:

a. There were no beginning or ending inventory balances. All expenditures were on account.

b. Actual production and sales were 62,500 coffee mugs.

c. Actual direct materials usage was 11,000 lbs. at an actual cost of $0.17 per lb.

d. Actual direct labor usage of 197,000 minutes at a cost of $33,490.

e. Actual overhead cost was $10,835 variable and $29,965 fixed.

f. Selling and administrative costs were $130,000.

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2. Journalize the purchase and usage of direct materials and the assignment of direct

labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production from Work in Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

5. Middleton intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

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