175k views
0 votes
​Company's budgeted prices for direct​ materials, direct manufacturing​ labor, and direct marketing​ (distribution) labor per​ attaché case are $39​, $7​, and $12​, respectively. The president is pleased with the following performance​ report:

Actual Costs Static Budget Variance
Direct materials 564,000 $400,000 $36,000 F
Direct manufacturing labor 78,000 80 2,000 F
Direct marketing (distribution) labor 110,000 120,000 10,000F


Actual output was 9,100 ​attaché cases. Assume all three​ direct-cost items above are variable costs.

Requirement:
a. Is the​ president's pleasure​ justified?
b. Prepare a revised performance report that uses a flexible budget and a static budget.

1 Answer

0 votes

Answer:

a) The president's pleasure is not justified because the budget performance was unfavorable in all the variable costs.

b) Revised Flexible Performance Report

Flexible Actual Variance

Budget Costs

Direct materials $354,900 $564,000 $209,100 U

Direct manufacturing labor 63,700 78,000 14,300 U

Direct marketing (distribution) labor 109,200 110,000 800 U

Flexible Static Variance

Budget Budget

Direct materials $354,900 $400,000 $45,100 U

Direct manufacturing labor 63,700 80,000 16,300 U

Direct marketing (distribution) labor 109,200 120,000 10,800 U

Step-by-step explanation:

a) Data and Calculations:

Actual Costs Static Budget Variance

Direct materials 564,000 $400,000 $36,000 F

Direct manufacturing labor 78,000 80,000 2,000 F

Direct marketing (distribution) labor 110,000 120,000 10,000 F

b) Budgeted Prices:

Direct materials = $39

Direct labor = $7

Direct marketing labor = $12

Actual Output = 9,100

Flexible Budget:

Direct materials = $354,900 ($39 x 9,100)

Direct labor = $63,700 ($7 x 9,100)

Direct marketing labor = $109,200 ($12 x 9,100)

The flexible budget for direct materials, labor and marketing were flexed in line with actual output.

User Skrud
by
8.1k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.