Outdoor Outfit Company makes a variety of jogging suits. It had planned to sell

Question

Outdoor Outfit Company makes a variety of jogging suits. It had planned to sell 10,000 jogging suits for $120 each this year. Its standard input costs and quantities are shown below. Furthermore, Outdoor Outfit Company does not maintain an inventory of these jogging suits. They are made in quantities sufficient to fill orders only. Standard Cost for direct material input: $10 per yard. Standard Quantity for direct material input: 3.5 yards. Standard Cost for direct labor input: $15 per hour. Standard Quantity for direct labor input: 2.0 hours. Budgeted Variable overhead cost: $80,000. Budgeted Fixed overhead cost: $60,000. Fixed and variable overhead are allocated based on direct labor hours. Records indicate 45,000 yards of fabric were used and 30,000 direct labor hours were used to produce and sell 12,000 suits. First Complete a static and flex budget. Then: Calculate the following variances: 1) Total static budget variance 2) Sales volume variance 3) Direct Materials price variance 4) Direct materials efficiency variance 5) Direct labor price variance 6) Direct labor efficiency variance 7) Variable overhead spending variance 8) Variable overhead efficiency variance 9) Fixed overhead spending variance 10) Production Volume Variance

Explanation / Answer

Answer:

Static Budget

Revenue ...........................= 10,000 * $ 120 = $ 1,200,000

Less: Expenses

Variable..........................................................$ 80,000

Fixed...............................................................$ 60,000

Budgeted Operationg profit...............................= $ 1,340,000

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