Use the standard price and cost data provided in Exercise 15-3. (Information wil

Question

Use the standard price and cost data provided in Exercise 15-3. (Information will Follow question) Assume that the actual sales price is $7.65 per unit and that the actual variable cost is $4.25 per unit. The actual fixed manufacturing cost is $2,850, and the actual selling and administrative expenses are $1,025. Required a.Determine the flexible budget variances. b.Classify the variances as favorable (F) or unfavorable (U). c.Provide another name for the fixed cost flexible budget variance. d. Comment on the usefulness of the variances with respect to performance evaluation and identify the member(s) of the management team who is (are) most likely to be responsible for these variances. Information from 15-3 Sexton Manufacturing Company established the following standard price and cost data. Sales Price $8.00 per unit Variable Manufacturing cost 4.00 per unit Fixed Manufacturing costs 3,000 total Fixed S&A; costs 1,000 total Sexton planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units

Explanation / Answer

1the actual sales price is $7.65 per unit 2the actual variable cost is $4.25 per unit. 3The actual fixed manufacturing cost is $2,850, 4actual selling and administrative expenses are $1,025. Direct mat'ls price var. = Flexible budget costs - Actual costs = (2Actual qty x 1Std price) - (4Actual qty x 3Actual price)=x Direct labor rate var. = Flexible budget costs - Actual costs = (Actual qty x Std rate) - (Actual qty x Actual rate)=y The price variance is the total of the direct materials price variance plus the direct labor rate variance=x+y b favorable variance c budget variance information dApproval of a variance allows the property owner "to use his property in a manner basically consistent with the established regulations with such minor variations

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