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Chapter 23: Q5RQ (page 1305)
Question: How is a flexible budget used?
Answer
A flexible budget isused for preparing the flexible budget performance report.
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McCarthy Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018. The 2018 revenue and cost information for McCarthy follows:
Sales Revenue \( 1,300,000
Cost of Goods Sold (at standard) 196,800
Direct materials cost variance 7,150 F
Direct materials efficiency variance 5,950 U
Direct labor cost variance 400 U
Direct labor efficiency variance 530 F
Variable overhead cost variance 650 U
Variable overhead efficiency variance 360 F
Fixed overhead cost variance 2,350 U
Fixed overhead volume variance 4,410 U
Assume each fender produced was sold for the standard price of \)65, and total selling and administrative costs were $250,000. Prepare a standard cost income statement for 2018 for McCarthy Fender
Preparing a standard cost income statement Review your results from Problem P23颅33B.
Middleton鈥檚 actual and standard sales price per mug is $5. Prepare the standard cost income statement for July 2018.
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.
What is a variance?
Understanding variance relationships
Complete the table below for the missing variances.
Total Flexible Budget Product Cost Variance (a) |
Total direct material variance (b) | Total direct labor variance (c) | Total Manufacturing Overhead Variance (d) |
Direct material cost variance | Direct material efficiency variance | Direct Labor Cost Variance | Direct Labor Efficiency Variance | Total Variable Overhead Variance | Total fixed overhead variance |
\(310F | \)165U | \(160U | \)415F | (e) | (f) |
Variable Overhead Cost Variance | Variable Overhead Efficiency Variance | Fixed Overhead Cost Variance | ||||
\(525U | \)575F | $50F |
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