Don Johnson is the management accountant for Cari-Blocks (CB), which manufactures specialty blocks. CB uses two direct cost categories: direct materials and direct manufacturing labour. Johnson feels that manufacturing overhead is most closely related to material usage. Therefore, CB allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2021, CB budgeted annual production of 200,000 blocks and adopted the following standards for each block: Input Cost/Block Direct materials 0.5 lb. @ $12/lb. $6.00 Direct manufacturing labour 1.4 hours @ $20/hour $28 Manufacturing overhead: Variable $6/lb. 0.5 lb. $3 Fixed $15/lb. 0.3 lb. $4.50 Standard cost per block $41.50 Actual results for April 2021 were as follows: Production 24,000 blocks Direct materials purchased 12,000 lb. at $13/lb. Direct materials used 11,450 lb. Direct manufacturing labour 38,000 hours for $798000 Variable manufacturing overhead $68,150 Fixed manufacturing overhead $155,000 For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U): g. Fixed manufacturing overhead spending variance h. Production-volume variance
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Don Johnson is the
At the beginning of 2021, CB budgeted annual production of 200,000 blocks and adopted the following standards for each block:
| Input | Cost/Block | |
| Direct materials | 0.5 lb. @ $12/lb. | $6.00 |
| Direct manufacturing labour | 1.4 hours @ $20/hour | $28 |
| Manufacturing overhead: | ||
| Variable | $6/lb. 0.5 lb. | $3 |
| Fixed | $15/lb. 0.3 lb. | $4.50 |
| $41.50 | ||
| Actual results for April 2021 were as follows: | ||
| Production | 24,000 blocks | |
| Direct materials purchased | 12,000 lb. at $13/lb. | |
| Direct materials used | 11,450 lb. | |
| Direct manufacturing labour | 38,000 hours for $798000 | |
| Variable manufacturing overhead | $68,150 | |
| Fixed manufacturing overhead | $155,000 |
For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U):
g. Fixed manufacturing overhead spending variance
h. Production-volume variance
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