One System assembles PCs and uses flexible budgeting and a
One System assembles PCs and uses flexible budgeting and a standard cost system. One System allocates overhead based on the number of direct materials parts. The company’s performance report includes the following selected data:
1. Determine the company’s standard cost for one unit.
2. Prepare a flexible budget based on the actual number of PCs sold.
3. Compute the price variance for direct materials and for direct labour.
4. Compute the efficiency variances for direct materials and direct labour.
5. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance.
6. What is the total flexible budget variance for One System’s manufacturing costs? Show how the total flexible budget variance is divided into materials, labour, and overhead variances.
7. Have One System’s managers done a good job or a poor job controlling material and labour costs? Why?
8. Describe how One System’s managers can benefit from the standard costing system.
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