ACCT552

Week 5 Homework

Please complete the below problems and submit your answers in the Week 5 Dropbox. See "Syllabus/Due Dates for Assignments & Exams" for due date information.

1. EM, Inc. private labels mini-cupcakes for Starbucks. For April 2012, it budgeted to purchase and use 18,000 pounds of flour at $0.39 a pound. Actual purchases and usage for April 2012 were 22,000 pounds at $0.42 a pound. EM budgeted to produce 120,000 mini-cupcakes. EM budgets to obtain 4 mini-cupcakes per pound of flour. Actual output was 132,000 mini cupcakes.

a. Compute the flexible-budget variance.

b. Compute the price variance.

c. Compute the efficiency variances.

Comment on the results for the requirements above and provide a possible explanation for them.

2. Kool Clothing is a manufacturer of designer dresses. The cost of each dress is the sum of three variable costs (direct materials cost, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead costs are allocated to each dress on the basis of budgeted direct manufacturing labor-hours per dress. For April 2012, each dress is budgeted to take five labor-hours. Budgeted variable manufacturing cost per labor hour is $15. The budgeted number of dresses to be manufactured in April 2012 is 1,250.

Actual variable manufacturing costs in June 2012 were $65,688 for 1,360 dresses started and completed. There was no beginning or ending inventory of dresses. Actual direct manufacturing labor-hours for April were 5,712.

a. Compute the flexible-budget variance.

b. Compute the spending variance.

c. Compute the efficiency variance for variable manufacturing overhead.

Comment on the results for the requirements above and provide a possible explanation for them.