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Gator Divers is a company that provides diving services such as underwater ship repairs to clients in the Tampa Bay area. The company’s planning budget for March appears below: |
| Gator DiversPlanning BudgetFor the Month Ended March 31 | |
| Budgeted diving-hours (q) | 250 |
| Revenue ($440q) | 110,000 |
| Expenses: | |
| 41,000 | |
| Supplies ($3q) | 750 |
| Equipment rental ($2,000 + $22q) | 7,500 |
| Insurance ($4,000) | 4,000 |
| Miscellaneous ($520 + $1.48q) | 890 |
| Total expense | 54,140 |
| Net operating income | 55,860 |
| Required: | |
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During March, the company’s activity was actually 240 diving-hours. Prepare a flexible budget for that level of activity. (Input all amounts as positive values. Round your answers to the nearest dollar amount.) Harmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 3,800 chopping boards using 2,318 board feet of hardwood. The hardwood cost the company $17,617. The company’s standards for one chopping board are 0.55 board feet of hardwood, at a cost of $8.00 per board foot. Required: | 1a. |
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Break down the difference computed in (1) above into a labor efficiency variance and a labor rate variance. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.) |
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Order Up, Inc., provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Order Up, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. |
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In the most recent month, 170,000 items were shipped to customers using 6,700 direct labor-hours. The company incurred a total of $17,085 in variable overhead costs. |
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According to the company’s standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $2.60 per direct labor-hour. |
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According to the standards, what variable overhead cost should have been incurred to fill the orders for the 170,000 items? |
| Total standard variable overhead cost | $ |
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Break down the difference computed in (1) above into a variable overhead efficiency variance and a variable overhead rate variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required.) |
| Variable overhead efficiency variance |
| Variable overhead rate variance |
| Portland Company’s Ironton Plant produces precast ingots for industrial use. Carlos Santiago, who was recently appointed general manager of the Ironton Plant, has just been handed the plant’s contribution format income statement for October. The statement is shown below: BudgetedActual Sales (7,000 ingots)$265,000 $265,000 Variable expenses: Variable cost of goods sold* 79,240 97,525 Variable selling expenses 19,000 19,000 Total variable expenses 98,240 116,525 Contribution margin 166,760 148,475 Fixed expenses: Manufacturing overhead 67,000 67,000 Selling and administrative 85,000 85,000 Total fixed expenses 152,000 152,000 Net operating income (loss) $14,760 $(3,525) *Contains direct materials, direct labor, and variable manufacturing overhead. Mr. Santiago was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, “I sure hope the plant has a standard cost system in operation. If it doesn’t, I won’t have the slightest idea of where to start looking for the problem.” The plant does use a standard cost system, with the following standard variable cost per ingot: Standard Quantity or HoursStandard Priceor RateStandard Cost Direct materials 3.5 pounds$2.10 per pound$7.35 Direct labor 0.4 hours$7.60 per hour 3.04 Variable manufacturing overhead 0.3 hours*$3.10 per hour 0.93 Total standard variable cost $11.32 *Based on machine-hours. During October the plant produced 7,000 ingots and incurred the following costs:a.Purchased 29,500 pounds of materials at a cost of $2.55 per pound. There were no raw materials in inventory at the beginning of the month.b.Used 24,300 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)c.Worked 3,400 direct labor-hours at a cost of $7.30 per hour.d.Incurred total variable manufacturing overhead cost of $8,400 for the month. A total of 2,400 machine-hours was recorded. It is the company’s policy to close all variances to cost of goods sold on a monthly basis. Required:1.Compute the following variances for October: a.Direct materials price and quantity variances. (Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.) Materials price variance$ Materials quantity variance$ b.Direct labor rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.) Labor rate variance$ Labor efficiency variance$ c.Variable overhead rate and efficiency variances. (Input all amounts as positive values. Do not round your intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.) Variable overhead rate variance$ Variable overhead efficiency variance$ 2a.Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for October. (Input the amount as a positive value. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.) Net variance$ 3.Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) [removed]Materials price variance[removed]Labor efficiency variance[removed]Variable overhead efficiency variance[removed]Labor rate variance[removed]Variable overhead rate variance[removed]Materials quantity variance |
