For 10 years, Thorncrest Kayaks has been manufacturing a line of touring kayaks.

Question

For 10 years, Thorncrest Kayaks has been manufacturing a line of touring kayaks. They sell for $1,850 each and have become very popular for intermediate kayakers looking for well-built boats. The fast pace of growth at the company has led management to become more concerned about implementing a process to monitor costs. As a result, the company's controller has recently implemented a standard costing system to assist management in planning and monitoring. At the start of the year, the controller worked with production personnel to produce the required data. manager told the controller that the plan is to produce 1,800 kayaks per year. In addition, the following data was provided to the controller: Standard cost per unit Direct materials Direct labour Variable overhcad: Maintenance S700 28 Fixed overhead Total unit cost Note that the company donates any unsold kayaks at the end of the season to not-for-profit camps for disadvantaged kids (therefore there are no beginning or ending inventories). After a busy year at Thorncrest, it was determined that a total of 1,700 units were produced and sold The following actual costs were also reported: S1,200,000 49,700 Direct materials Direct labour Variable ovcrhead Maintenance 29,100 518,350 110,000 Fixed overhead No beginning or ending inventories. The payroll department reported that 4,900 labour hours were recorded to produce the 1,700 kayaks, and this was 10% more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labour hours. Required 1. Prepare a performance report for Thorncrest Kayaks, using a flexible budget, comparing actual costs with expected costs for the actual 2. Calculate the spending and efficiency variances for variable overhead (both maintenance and utilities) and interpret the variances. (10 points) 3. Calculate and interpret the fixed overhead spending and volume variances. (4 points) production. (6 points)

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Flexible Budget Variance Volume Variance Standard Budget Actual $ F/U/N Flexible Budget $ F/U/N Master Budget NO of Kayaks Sold 1700 1700 1800 Sales Revenue 1700*1850 1800*1850 3145000 0 3145000 185000 U 3330000 Direct Material 1700*700 1800*700 1200000 10000 U 1190000 70000 F 1260000 Direct Labor 1700*28 1800*28 49700 2100 U 47600 2800 F 50400 Variable Overhead: -Maintenance 1700*20 1800*20 29100 4900 F 34000 2000 F 36000 -Utilities 1700*310 1800*310 518350 8650 F 527000 31000 F 558000 Fixed Overhead 1800*60 110000 2000 U 108000 0 N 108000 Net Income 1237850 550 F 1238400 79200 U 1317600 Actual Labor Hours 4900 Standard Labor Hours 4455 Maint Utilities Overheads 29100 518350 Actual Rate                                   5.94        105.79 Standard Rate                                   6.53        116.35 Variable Overhead Spending Variance Maintenance (6.53-5.94)*4900 2891 F Utilities (116.35-105.79)*4900 51744 F Variable Overhead Efficiency Variance Maintenance (4900-4455)*6.53 2906 U Utilities (4900-4455)*116.35 51776 U From Above Table: Fixed Overhead Spending Variance 2000 U Fixed Overhead Volume Variance 0 N

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