*Show all calculations. 13-28 Flexible budget, direct materials, and direct manu
ID: 2585343 • Letter: #
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13-28 Flexible budget, direct materials, and direct manufacturing labor variances. Palermo Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2013: Expected production and sales 6,300 units Total fixed costs $1,350,000 Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manufacturing labor: Standard Quantity Standard Price Standard Unit Cost Direct materials 14 pounds $12 per pound $168 Direct manufacturing labor 3.1 hours $40 per hour S124 During 2013, actual number of units produced and sold was 4,800. Actual cost of direct materials used was $813,750, based on 62,500 pounds purchased at $13.02 per pound. Direct manufacturing labor-hours actually used were 17,500, at the rate of $33.48 per hour. As a result, actual direct manufacturing labor costs were $585,900. Actual fixed costs were $1,160,000. There were no beginning or ending inventories. Required 1. Calculate the sales-volume variance and fexible-budget variance for operating income. 2. Compute price and efficiency variances for direct materials and direct manufacturing labor.Explanation / Answer
1.Statement showing the calculation of sales volume variance and flexible budget variance for operating income:
A. Sales volume variance = 436,500F
B. Flexible Budget Variance = 191,950F
Working Notes:
(a) Direct material cost for flexible budget = 4,800 * 168 = 806,400
(b) Direct material cost for static budget = 6,300 * 168 = 1,058,400
(c) Direct manufacturing labour cost for flexible budget = 4800 * 124 = 595,200
(d) Direct manufacturing labour cost for static budget = 6300 * 124 = 781,200
2. Statement showing the calculation of price & efficiency variance for direct material & manufacturing labor :
A. Direct Material Price Variance :
Actual Incurred price - Budgeted price
(Actual input quantity * Actual price) - (Actual Input quantity * Budgeted price)
= (62,500 * 13.02) - (62,500 * 12.00)
=813,750 - 750,000
= 63,750U
B. Direct Material efficiency variance :
(Actual Input quantity * Budgeted price) - (Budgeted input quantity allowed for actual output * Budgeted price)
(62,500 * 12.00) - (4,800 *14 *12)
750,000 - 806,400
56,400F
C. Direct manufacturing labour price variance :
Actual Incurred price - Budgeted price
(Actual input quantity * Actual price) - (Actual Input quantity * Budgeted price)
= (17,500 *33.48) - (17,500 * 40)
= 585,900 - 700,000
= 114,100F
D. Direct manufacturing labor efficiency variance :
(Actual Input quantity * Budgeted price) - (Budgeted input quantity allowed for actual output * Budgeted price)
(17,500 * 40) - (4,800 * 3.1hr * $40)
7000,000 - 595,200
104,800U
Particulars Actual Result (1) Flexible Budget (2) Flexible Budget variance (3) = (1) - (2) Static Budget(4) Sales Volume variance (5) = (2) -(4) Unit Sold 4,800 4,800 0 6,300 1,500 U Direct mterial ($) 813,750 806,400 (a) 7,350U 1,058,400 (b) 252,000F Direct manufacturing labor 585,900 595,200 (c) 9,300F 781,200 (d) 186,000F Fixed Cost 1,160.000 1,350,000 190,000F 1,350,000 0 Total Cost 2,559,650 2,751,600 191,950F 3,189,600 436,500FRelated Questions
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