Warwick Bottle Company (WBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100
Question:
Warwick Bottle Company (WBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:
Standard Cost per 100
Cost Category Two-Liter Bottles
Direct labor ………………...……… $1.32
Direct materials ………………..….. 5.34
Factory overhead …………………. 0.34
Total ………………………….....…… $7.00
At the beginning of July, WBC management planned to produce 650,000 bottles. The actual number of bottles produced for July was 700,000 bottles. The actual costs for July of the current year were as follows:
Actual Cost for the
Cost Category Month Ended July 31, 2010
Direct labor ………………….. $ 9,400
Direct materials ……………… 36,500
Factory overhead ……………… 2,400
Total ………………….......…….. $48,300
a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.
b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July.
c. Interpret the budget performance report.
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