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Chapter 23: Q14RQ (page 1305)
Question: List the variable overhead variances, and briefly describe each
Answer
The variable overhead variances can be in the form of variable overhead cost varianceand variable overhead efficiency variance.
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List the eight product variances and the manager most likely responsible for each.
Murphy Company managers received the following incomplete performance report:
Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)
Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.
Preparing a flexible budget computing standard cost variance
Morton Recliners manufactures leather recliners and uses flexible budgeting and a
standard cost system. Morton allocates overhead based on yards of direct materials.
The company’s performance report includes the following selected data:
Static Budget Actual Results (1,000 recliners) (980 recliners) |
Sale (1,000 recliners \(505 each) \) 505,000 (980 recliners \(480 each) \) 470,400 |
Variable Manufacturing Costs: Direct Materials (6,000 yds. @ \(8.60/yd.) 51,600 (6,143 yds. @ \)8.40/yd.) 51,601 Direct Labor (10,000 DLHr @ \(9.20/DLHr) 92,000 (9,600 DLHr @ \)9.30/DLHr) 89,280 Variable Overhead (6,000 yds. @ \(5.20/yd.) 31,200 (6,143 yds. @ \)6.60/yd.) 40,544 |
Fixed Manufacturing Costs: Fixed Overhead 60,600 62,600 Total Cost of Goods Sold 235,400 244,025 |
Gross Profit \( 269,600 \) 226,375 |
Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
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.
3. Have Morton’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Morton’s managers can benefit from the standard cost system.
Question:Match the variance to the correct definition.
Variance Definition
2. Cost variance
3. Efficiency variance
4. Flexible budget variance
5. Sales volume variance
6. Static budget variance
a. The difference between the expected results in the flexible budget for the actual units sold and the static budget.
b. The difference between actual results and the expected results in the flexible budget for the actual units sold.
c. Measures how well the business keeps unit costs of material and labor inputs within standards.
d. The difference between actual results and the expected results in the static budget.
e. Measures how well the business uses its materials or human resources
Question:What is a standard cost income statement?
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