Problem 1. (10 Points).

Engineworks Co. provides the following fixed budget data for the year:

Sales (20,000 units) .		$600,000
Cost of sales:
Direct materials ..	$200,000
Direct labor	160,000
Variable overhead ..	60,000
Fixed overhead ..	80,000	500,000
Gross profit .		$100,000
Operating expenses:
Fixed ..	$12,000
Variable .	40,000	52,000
Income from operations ..		$ 48,000

The company's actual activity for the year follows:
Sales (21,000 units) .		$651,000
Cost of goods sold:
Direct materials ..	$231,000
Direct labor	168,000
Variable overhead ..	73,500
Fixed overhead ..	77,500	550,000
Gross profit .		$101,000
Operating expenses:
Fixed .	12,000
Variable .	39,500	51,500
Income from operations .		$ 49,500

Required:

Prepare a flexible budget performance report for the year using the contribution margin format.

Problem 2. (10 Points).

The following information comes from the records of Barney Co. for the current period.

a. Compute the direct materials price and quantity variances, direct labor rate and efficiency variances and state whether the variance is favorable or unfavorable.

b. Prepare the journal entries to charge direct materials and direct labor costs to work in process and the materials and labor variances to their proper accounts.

Actual costs and quantities:
Direct materials used	37,000 feet @ $6.20 per foot
Direct labor hours used	50,660 hours
Direct labor rate per hour .	$16.50
25,000 units were produced during the period.
Standard costs and quantities per unit:
Direct materials	1.5 ft. @ $6.10 per ft.
Direct labor ...	2 hours @ $17 per hour

Problem 3. (10 Points).

Gleason Company has developed the following standard cost data based on 60,000 direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is $180,000 at this level of activity.

	Per Unit
Direct material (3 lbs. @ $2.00/1b.)	$ 6.00
Direct labor (0.5 hrs. @ $8.00/hr. ) .	4.00
Variable overhead (0.5 hrs. @ $3.00/hr.)	1.50
Fixed overhead (0.5 hrs. @ $6.00/hr.)	3.00
Total standard cost ......	$14.50

During the current period, the company operated at 80% of capacity and produced 128,000 units. Actual costs were:

Direct material (380,000 lbs.) .	$779,000
Direct labor (63,000 hrs.) .	507,150
Fixed overhead .	365,000
Variable overhead	220,000

Calculate the variable overhead spending and efficiency variance and the fixed overhead spending and volume variances. Indicate whether each is favorable or unfavorable.