Homework 8

Homework 8

 

1.  The actual results and static budget are given below for Clark Company. 

 

a)

    

  
Create a flexible budget for Clark Company

 

 

 

    

   

 

 

 

   

   

9,000 9,000

 6,000

 8,000

   

   

Actual	Flexible Budget	Static Budget
Sales Volume (units)		8,000			9,000
Variable overhead
Cleaning supplies	6,400	7,200
Electricity	3,000	2,700
Maintenance	1,200	1,800
Total variable overhead
Fixed overhead
Supervisor salary
Depreciation		6,000
Rent	7,500
Total fixed overhead
Total overhead

   

b)      
How much of the difference between actual and the static budget is due to cost control and how much is due to activity?  Provide numbers and direction.

   

2.  Huron Company produces a commercial cleaning compound called Zoom.  The direct material standards for one unit of Zoom are given below:

                                

               

Standard Quantity              Standard Price         Standard Cost per Unit

Direct material                       4.6 pounds                          $2.50 per pound                 $11.50

 

During the most recent month, the following activity was recorded:

o   

Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.

o    All of the material purchased was used to produce 4,000 units of Zoom.

 

a)  Compute the material cost variances.  Indicate whether they are favorable or unfavorable.

  

3.  The following information is provided by the Atlantic Company:

               

Actual direct material cost	$24,000
Standard direct material cost	$20,000
Direct material usage variance	$3,000 unfavorable

 

        a)    What is the direct material price variance (indicate whether it is favorable or unfavorable)?