Preston Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Preston allocates overhead
Question:
Preston Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Preston allocates overhead based on yards of direct materials. The company’s performance report includes the following selected data:
Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead Âvolume variances.
3. Have Preston’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Preston’s managers can benefit from the standard costingsystem.
Static Budgt Actual Results (1,000 recliners) (980 recliners) (1,000 recliners x $495 each) (980 recliners x $475 each) Sales 495,000 465,500 Variable Manufacturing Costs: Direct Materials 6,000 yds, 8.80yd.) (6,150 yds. $8.60yd.) (10,000 DLHr$9.20DLHr) (9,600 DLHr $9.30DLHr) (6,000 yds. s5.00yd.) (6,150 yds. 6.40d.) 52,800 52,890 Direct Labor 92,000 89,280 Variable Overhead 30,000 39,360 Fixed Manufacturing Costs: Fixed Overhead Total Cost of Goods Sold Gross Profit 60,000 234,800 $ 260,200 62,000 243,530 221,970
Step by Step Answer:
Requirement 1 PRESTON RECLINERS Flexible Budget Budget Amounts Per Unit Actual Units Recliners 980 Sales 49500 485100 d Variable Manufacturing Costs Direct Materials 5280 a 51744 e Direct Labor 9200 b ...View the full answer
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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