Carol Morgan manages the production division of Perez Corporation. Ms. Morgan's responsibility report for the month of August follows: Budget Actual Variance Controllable costs $24,080 9,792 3,900 2,100 Raw materials $29,680 $ 5,600 U 5,526 U 1,700 U 1,000 F Labor 15,318 5,600 1,100 Maintenance Supplies Total $39,872 $51,698 $11,826 U The budget had called for 5,600 pounds of raw materials at $4.30 per pound, and 5,600 pounds were used during August; however, the purchasing department paid $5.30 per pound for the materials. The wage rate used to establish the budget was $19.20 per hour. On August 1, however, it increased to $22.20 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 120 hours of overtime at a $33.30 rate. The projected 510 hours of labor in the budget would have been sufficient had it not been for the 120 hours of overtime. In other words, 630 hours of labor were used in August.

Carol Morgan manages the production division of Perez Corporation. Ms. Morgan's responsibility report for the month of August follows: Budget Actual Variance Controllable costs $24,080 9,792 3,900 2,100 Raw materials $29,680 $ 5,600 U 5,526 U 1,700 U 1,000 F Labor 15,318 5,600 1,100 Maintenance Supplies Total $39,872 $51,698 $11,826 U The budget had called for 5,600 pounds of raw materials at $4.30 per pound, and 5,600 pounds were used during August; however, the purchasing department paid $5.30 per pound for the materials. The wage rate used to establish the budget was $19.20 per hour. On August 1, however, it increased to $22.20 as the result of an inflation index provision in the union contract. Furthermore, the purchasing department did not provide the materials needed in accordance with the production schedule, which forced Ms. Morgan to use 120 hours of overtime at a $33.30 rate. The projected 510 hours of labor in the budget would have been sufficient had it not been for the 120 hours of overtime. In other words, 630 hours of labor were used in August.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 13CE: Nashler Company has the following budgeted variable costs per unit produced: Budgeted fixed overhead...

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