Warwick Bottle Company ( WBC ) manufactures plastic two-liter bottles for the be

Question

Warwick Bottle Company (WBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

At the beginning of March, WBC management planned to produce 440,000 bottles. The actual number of bottles produced for March was 480,000 bottles. The actual costs for March of the current year were as follows:

Enter all amounts as positive numbers.

a. Prepare the March manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.

Compare the actual costs with the standard cost at actual volume for direct labor, direct materials, and overhead. Identify the cost variance as favorable (actual less than standard) or unfavorable (actual greater than standard).

Review the concepts of favorable and unfavorable variances.

Learning Objective 2.

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for March. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Cost Category Standard Cost
per 100 Two-Liter
Bottles Direct labor $1.26 Direct materials 5.22 Factory overhead 0.32 Total $6.80

Explanation / Answer

a)

b)

Warwick Bottle Company

Manufacturing Cost Budget

For the Month Ended March 31, 2014



Standard Cost at Planned Volume (440,000 Bottles) Manufacturing costs:

Direct labor
$5,544

Direct materials
$22,968

Factory overhead
$1,408

Total
$29,920

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