Rammazzotti, Inc., is looking for feedback on company performance. The company c

Question

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:

Rammazzotti Inc., had the following budgeted data:

Unit sales for 2014                                 28,000

Unit production for 2014                         28,000

Budgeted fixed overhead for 2014:

Supervision                                                      $ 800

Depreciation                                           2,000

Rent                                                                 100

Budgeted variable costs per unit:

Direct materials                                                $0.15

Direct labor                                                      0.20

Supplies                                                           0.02

Indirect labor                                                    0.05

Power                                                                        0.02

The following actually occurred:

Actual unit sales for 2014                       27,000

Actual unit production for 2014     29,000

Actual fixed overhead for 2014:

Supervision                                                      $ 850

Depreciation                                           2,000

Rent                                                                 150

Actual variable costs:

Direct materials                                                $3,500

Direct labor                                                      4,900

Supplies                                                       530

Indirect labor                                                    1,250

Power                                                                    470

1. Refer to Figure 8-8. The static budget variance for total fixed overhead is

a. $50 U.

b. $50 F.

c. $-0-.

d. $100 U.

2. Refer to Figure 8-8. The static budget variance for direct materials is

a. $700 F.

b. $700 U.

c. $400 F.

d. $400 U.

3. Refer to Figure 8-8. The total flexible budgeted costs for 2014 are

a. $12,560.

b. $15,660.

c. $13,510.

d. $15,220.

4. Refer to Figure 8-8. The flexible budget for direct materials cost in 2014 is

a. $3,500.

b. $4,350.

c. $4,200.

d. $4,800.

5. Refer to Figure 8-8. The flexible budget variance for indirect labor for 2014 is

a. $200 F.

b. $150 F.

c. $150 U.

d. $200 U.

6. Refer to Figure 8-8. The flexible budget variance for total cost for 2014 is

a. $2,010 F.

b. $240 F.

c. $1,620 F.

d. $850 F.

Explanation / Answer

Solution 1:

Static budget variance for total fixed overhead = Budgeted fixed overhead - Actual fixed overhead

= ($800 + $2000 + $100) - ($850 + $2,000 + $150) = $100 U

Hence option d is correct.

Solution 2:

Static budget variance for direct materials = Budgeted material cost - Actual material cost = 28000 * $0.15 - $3,500

= $700 F

Hence option a is correct.

Solution 3:

Actual unit produced for 2014 = 29000

budgeted variable cost per unit = $0.15 + $0.20 + $0.02+ $0.05 + $0.02 = $0.44

Budgeted fixed cost = $800 + $2,000 + $100 = $2,900

total flexible budgeted costs for 2014 = 29000*$0.44 + $2,900 = $15,660

Hence option b is correct.

Solution 4:

Flexible budget for direct material cost in 2014 = 29000 * $0.15 = $4,350

Hence option b is correct.

Note: I have answered first 4 parts as per chegg policy. Kindly post separate question for answer of remaining parts.

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