1) Gerdie Company has the following information: Month Budgeted Sales March $50,
ID: 2386506 • Letter: 1
Question
1) Gerdie Company has the following information:Month Budgeted Sales
March $50,000
April 53,000
May 51,000
June 54,500
July 52,500
In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month's cost of sales.
Required:
Prepare a purchases budget for April through June.
4) Heather's Pillow Company manufactures pillows. The 20X5 operating budget is based on production of 20,000 pillows with 0.5 machine-hour allowed per pillow. Variable manufacturing overhead is anticipated to be $220,000.
Actual production for 20X5 was 18,000 pillows using 9,500 machine-hours. Actual variable costs were $20 per machine-hour.
Required:
Calculate the variable overhead spending and efficiency variances.
Explanation / Answer
Purchases Budget for April, may, and june: March April May June July Budgeted Sales - (A) 50000 53000 51000 54500 52500 Gross profit 40% - (B) 20000 21200 20400 21800 21000 Cost of sales - (C) =( A - B) 30000 31800 30600 32700 31500 Add: Desired stock 30% of next month sales 9540 9180 9810 9450 Opening stock (previous year closing stock) 9540 9180 9810 Required Purchases 31440 31230 32340 Cost of sales = Opening stock + purchase - closing stock Purchases = Cost of sales + Desired stock - Opening stock Purchases Budget for April, may, and june: March April May June July Budgeted Sales - (A) 50000 53000 51000 54500 52500 Gross profit 40% - (B) 20000 21200 20400 21800 21000 Cost of sales - (C) =( A - B) 30000 31800 30600 32700 31500 Add: Desired stock 30% of next month sales 9540 9180 9810 9450 Opening stock (previous year closing stock) 9540 9180 9810 Required Purchases 31440 31230 32340 Cost of sales = Opening stock + purchase - closing stock Purchases = Cost of sales + Desired stock - Opening stock4. Variable overhead speninding variance = Actual hours *(Standard Rate - Actual Rate) Budgeted production = 20000 Pillows Variable manufacturing overhead = $220,000 Budgeted machine hour per pillow = 0.5hr For 20000 pillow (20000 * 0.5) = 10000 Machine hours Standard Variable cost per machine hour(220000/10000) = $22 Variable overhead spending variance = 9500 (22 - 20) = 9500 * 2 = $19,000 Favorable Variable overhead Efficiency Variance = (Actual hours worked * Standard Rate) - (Standard hours allowed * Standard Rate) Variable overhead Efficiency Variance = (Actual hours worked * Standard Rate) - (Standard hours allowed * Standard Rate)
Actual hours worked = 9500 Standard hours ( 18000 * 0.5) = 9000 Standard machine hour rate = $22 Variable overhead Efficiency Variance = (9500 * 22) - (9000 * 22) = 209000 - 198000 = 11000 Un favorable Thank you.... Purchases Budget for April, may, and june: March April May June July Budgeted Sales - (A) 50000 53000 51000 54500 52500 Gross profit 40% - (B) 20000 21200 20400 21800 21000 Cost of sales - (C) =( A - B) 30000 31800 30600 32700 31500 Add: Desired stock 30% of next month sales 9540 9180 9810 9450 Opening stock (previous year closing stock) 9540 9180 9810 Required Purchases 31440 31230 32340 Cost of sales = Opening stock + purchase - closing stock Purchases = Cost of sales + Desired stock - Opening stock
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