At the beginning of the period, the Assembly Department budgeted direct labor of

Question

At the beginning of the period, the Assembly Department budgeted direct labor of $110,000, direct material of $170,000 and fixed costs of $28,000 for 8,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting.

$385,000

$350,000

$378,000

$335,500

The Clydesdale Company has sales of $4,800,000. It also has invested assets of $5,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.

What is Clydesdale Company's residual income?

$1,116,000

$850,000

$850,000

$760,000

Greyson Company produced 8,300 units of their product that required 4.00 standard hours per unit. The standard fixed overhead cost per unit is $1.80 per hour at 27,000 hours, which is 100% of normal capacity.

The Fixed Factory Overhead Volume Variance is equal to:

-$11,160 Favorable

$6,200 Unfavorable

$11,160 Unfavorable

-$6,200 Favorable

Consider the following budget information: direct materials to be used or placed in production totals $184,750; direct labor totals $577,500; factory overhead totals $866,250; work in process inventory January 1, 2018, was expected to be $589,100; and work in progress inventory on December 31, 2018, is expected to be $597,600. What is the budgeted cost of goods manufactured?

$1,628,500

$1,620,000

$2,815,200

$597,600

The ABC Jeans Company produces two different types of jeans. One is called the style “A” and the other is called style “B”. The company’s Production Budget requires 353,500 units of style "A" and 196,000 units of style "B" to be manufactured. It is estimated that 2.5 direct labor hours will be needed to manufacture one pair of style "A" and 3.75 hours of direct labor hours for each pair of style "B"

883,750 direct labor hours

1,618,750 direct labor hours

735,000 direct labor hours

1,815,625 direct labor hours

Explanation / Answer

1. For 8000 hours of production:Direct labor=$110000 , Direct material = $170000 and fixed costs= $28000

For 10000 hours of production:

Direct labor= $110000*10000/8000= $137500

Direct Material = $170000*10000/8000= $212500

Fixed cost = $28000 (will remain same)

Total cost (budget) for 10000 units = $137500+$212500+$28000=$378000

2. Residual income= Operating income- desired income

Operating income = Sales- Operating expenses= $4800000-$3600000 = $1200000

Desired income= Minimum rate of return * invested assets = 7%* $5000000= $350000

Residual income = $ 1200000-$350000= $850000

3. Fixed overhead volume variance = Budgeted fixed overhead - Standard fixed overhead cost allocated to production

Budgeted fixed overhead = standard rate per hour * Budgeted hours= $1.8*27000 = $48600

Standard fixed overhead cost allocated to production = standard rate per hour* standard hours for actual output

Standard hours for actual output= Actual output* std hours needed for actual output = 8300*4=33200

Now, Standard fixed overhead cost allocated to production = $1.8*33200= $59760

Fixed overhead volume variance = Budgeted fixed overhead - Standard fixed overhead cost allocated to production

=$48600-$59760= $11160 Favorable.

4. Budgeted cost of the goods manufactured = Direct material + Direct labour + Factory overheads + Opening work in progress inventory - Closing work in progress inventory

= $184750+$577500+$866250+$589100-$597600

=$1620000

5. Direct labor hours needed for style A jeans = No. of units * labor hour per unit = 353500*2.5

= 883750

Direct labor hours needed for style B jeans = No. of units * labor hour per unit = 196000*3.75

=735000

Total direct lobor hours needed for Jeans A & B = 853750+735000= 1618750 direct labor hours

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