Garden Mills Inc. established the following standards for its principal product, a kit to convert ordinary lawn mowers into mulching mowers:

Direct Materials:

Blades2 blades @ $13 per blade

Adaptors1 kit @ $6 per adaptor

Direct Labor:

Grinding hour @ $14 per hour

Finishing & Testing2/3 hour @ $12 per hour

Overhead

Variable (unit level)$8 per machine hour

Batch Level (total)50 material moves @ $150 per move

Facility(total)7,000 square feet @ $2 per square foot

The standard variable overhead cost per conversion kit is $2.

Traditionally, all overhead is applied on the basis of machine hours.

For ABC budgeting, one material move is allowed for every 100 kits produced.The budgeted fixed portion of the batch level cost is $500.

Planned production and sales for the year was 5,000 conversion kits.The planned selling price per kit is $50.

Actual Results

Kits produced & sold5,200 (this is within the relevant range)

Actual selling price per kit$48

Materials:

Blades Purchased11,300 blades @ $12.75 per blade

Blades Used10,900 blades

Adaptors Purchased5,900 @ $5.60 per adaptor

Adaptors Used5,650 adaptors

Labor, Grinding2,800 hours, total cost $42,000

Labor, Finishing & Testing3,700 hours, total cost $45,325

Machine hours used1,325 machine hours

Variable Overhead$11,455

Batch Level Overhead (total)$7,938 (54 moves)

Batch Level Overhead (variable)$7,200

Facility Level Overhead$14,500 (7,000 square feet)

A.Prepare the flexible manufacturing cost budget for the year's actual output.

B.Calculate the sales variances.

C.Calculate the material variances.

D.Calculate the labor variances.

E.What is the unit quantity standard for variable overhead? In other words, how many machine hours are "allowed" for each conversion kit?

F.Calculate the variable (unit level and variable batch) and fixed (fixed batch and facility) overhead variances. Then sum them to get the total of each type of overhead variance.(One set of values for total variable OH variances, one set of values for total fixed OH variances).

G.provide appropriate journal entries for C, D, & F.

H.Calculate thetotalamount (variable, batch & fixed) of over or under applied overhead.

I.Prepare the journal entries to close the variance accounts.The following balances before allocating variances are:

Raw Materials,$5,000

WIP,$8,000

Finished Goods, $12,000

COGS,$60,000

Check figures:

A.Total manufacturing cost = $276,580

B.SPV = 10,400U;SVV = 10,000F

C.DMPV, Blades = 2,825F; Total material variance, Blades = $8,875U

D.DLRV, Finishing = $925U; Total labor variance, Finishing = $3,725U

E.0.25 mhrs per kit

F.Total variable overhead (unit level) variance = $1,055U;Total variable overhead (batch level) variance = $80F

G.Journal entries for material variances will include:

Debit to RM Inventory, Adaptors $35,400

Debit to WIP Inventory, Adaptors, $31,200

Journal entries for labor variances for Grinding will include:

Debit to WIP inventory for $36,400

Credit to Wages Payable for $42,000

Journal entries for net variable overhead variances will include:

Net debits to VOH spending variance (in this problem, net means the sum of unit level and batch level variable overhead spending variances) of $495.

Credit to MOH control - variable of $975.

Journal entries for net fixed overhead variances will include:

Net debits FOH spending variance of $738.

Net credit to FOH volume variance of $580.

H.Total underapplied OH = $1,133

I.The net variance is $14,443 debit balance; allocations will be $1,447 to WIP, $2,171 to FG, and $10,855 to COGS.

Problems and answers are provided, please show steps to get these answers.

Answer rating: 100% (QA)

A To prepare the flexible manufacturing cost budget for the years actual output we need to calculate the total manufacturing cost using the given information Lets calculate each component Direct Mater... View the full answer