10. Big Oil Company uses oil to produce gasoline. Big Oil budgeted 35,000 barrel

ID: 2406964 • Letter: 1

Question

10. Big Oil Company uses oil to produce gasoline. Big Oil budgeted 35,000 barrels of oil for purchase in June for $90 per barrel Direct labor budgeted in the refining process was $240,000 for June. Factory overhead was budgeted $400,000 during June. The inventories on June 1 were estimated to be: Ol Work in Process Gasoline $15,200 12,900 16,900 The desired inventories on June 30 are: Oil Work in Process $16,100 13,500 17,300 The budgeted Cost of Goods Sold is a. $3,149,100 b. $3,788,100 c.$3,788,500 d. $3,789,100 e $3,792,400 IL Which of the following statements about budgeting is FALSE? a A budget is one way to define and quontify success. b. The accounting department should define the budget(s) for the busines. c. The budgeting process usually begins with preparation of a sales budget d. Budgeted production is often higher or lower than budgeted sales e Some budgets are static; other budgets are flexible (i.e, vary depending on production levels) 12. The total manufacturing cost variance is a the difference between actual amount of direct material used in productian and the standard quantity of material for the units produced b. the flexible budget variance plus the time variance c. the difference between planned costs and standard costs for units produced d the static budget, adjusted for inflation and other factors, compared to actual costs e the difference between actual costs incurred and the standard costs for the actual number of units produced

Explanation / Answer

1) Solution: 3,788,100

Working:

Beginning Direct material

15,200

Plus: Raw material purchased (35000*90)

3,150,000

Minus: Ending Material balance

-16,100

Raw material used

3,149,100

Plus: Direct labor

240,000

Plus: manufacturing OH

400,000

Manufacturing cost incurred during the year

3,789,100

Plus: Beginning work in progress

12,900

Less: Closing work in progress

-13,500

Cost of goods manufactured

3,788,500

Plus: Finished goods

8,300

Plus: Beginning Balance

8,600

Minus: Finished goods

-9,400

Minus: closing balance

-7,900

3,788,100

2) Solution: The accounting department should define the budget for the business

Explanation: It is not necessary that the accounting department should define the budget for the business

3) The total manufacturing cost variance is

Solution: the difference between actual amount of direct material used in production and the standard quantity of material for the units produced

Explanation: The total manufacturing cost variance refers to difference among actual costs and standard cost