Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the b

Question

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: At the beginning of July, GBC management planned to produce 400,000 bottles. The actual number of bottles produced for July was 406,000 bottles. The actual costs for July of the current year were as follows: Required: Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Explanation / Answer

A.

Prepare the July manufacturing standard cost budget:

Manufacturing cost budget

For the month ended July 31, 2016

Manufacturing cost

Standard cost
at planned volume (400,000)

Direct labor (400,000 *2/100)

$             8,000

Direct material (400,000 *9.10 / 100)

$           36,400

Factory overhead (400,000 * 0.55/100)

$             2,200

Total

$           46,600

Prepare a budget performance report for manufacturing cost:

Budget performance report

For the month ended July 31, 2016

Manufacturing cost

Actual cost

Standard cost at
actual volume

cost variance
favorable or Unfavorable)

Direct labor (406,000 *2/100)

$             7,540

8120

$580 (F)

Direct material (406,000 *9.10 / 100)

$           35,750

36946

$1196 (F)

Factory overhead (406,000 * 0.55/100)

$             2,680

2233

$447 (U)

Total manufacturing cost

$           45,970

47299

Manufacturing cost budget

For the month ended July 31, 2016

Manufacturing cost

Standard cost
at planned volume (400,000)

Direct labor (400,000 *2/100)

$             8,000

Direct material (400,000 *9.10 / 100)

$           36,400

Factory overhead (400,000 * 0.55/100)

$             2,200

Total

$           46,600

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