The following information is provided to assist you in evaluating the performanc
ID: 2498596 • Letter: T
Question
The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:
Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations. Round your answer to the nearest dollar amount. )
The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:
Explanation / Answer
Answer:
Direct materials:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs Allowed for Good Output)
(AP x AQ)
(SP x AQ)
(SP x SQ)
$1.75a x 80,600 gallons
= $141050
$1.65 x 80,600 gallons
= $132,990
$1.65 x 2 gallons
x 55,000 units
= $181500
$8060 U
$48600 F
Direct labor:
$13.65b x 9780 hours
= $ 133,497
$14 x 9780 hours
= $136920
$14 x 0.2 hours
x 55,000 units
= $154000
$3423 F
$17080 F
Variable overhead:
61% x $175,200
= $106872
$13 x 9780 hours
= $127140
$13 x 0.2 hours
x 55,000 units
= $143000
$2,0268 F
$15860 F
Fixed overhead:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
39% x $175200
= $68,328
$70320c
$1.81d x 55,000
= $99550
$1992 F
$29230 F
c There are 38800 units in the master production budget, computed by dividing total master budget costs by standard unit cost as follows:
Materials: 128040 / ($1.65 x 2 gallons)
= $128040 / $3.30 = 38800 units.
Labor: $108640 / ($14.00 x 0.2 hour)
= $108640 / $2.80 = 38800 units.
This means the master budget variable overhead amount is $100880 = $13 x 0.2 hour x 38800 units. So the fixed overhead budget is $70320 = $171,200 – $100800.
d.$1.81 =$70320/38800 units
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs Allowed for Good Output)
(AP x AQ)
(SP x AQ)
(SP x SQ)
$1.75a x 80,600 gallons
= $141050
$1.65 x 80,600 gallons
= $132,990
$1.65 x 2 gallons
x 55,000 units
= $181500
$8060 U
$48600 F
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