he budget director of Birding Homes & Feeders Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January: Estimated sales for January: Bird house 15,000 units at $25 per unit Bird feeder 40,000 units at $15 per unit Estimated inventories at January 1: Direct materials: Wood 600 ft. Plastic 1,000 lbs. Finished products: Bird house 1,000 units at $15 per unit
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The budget director of Birding Homes & Feeders Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the
- Estimated sales for January:
Bird house 15,000 units at $25 per unit Bird feeder 40,000 units at $15 per unit - Estimated inventories at January 1:
Direct materials: Wood 600 ft. Plastic 1,000 lbs. Finished products: Bird house 1,000 units at $15 per unit Bird feeder 2,500 units at $8 per unit - Desired inventories at January 31:
Direct materials: Wood 500 ft. Plastic 1,250 lbs. Finished products: Bird house 1,500 units at $15 per unit Bird feeder 3,000 units at $8 per unit - Direct materials used in production:
In manufacture of Bird House: Wood 0.80 ft. per unit of product Plastic 0.10 lb. per unit of product In manufacture of Bird Feeder: Wood 0.20 ft. per unit of product Plastic 1.00 lb. per unit of product - Anticipated cost of purchases and beginning and ending inventory of direct materials:
Wood $2.50 per ft. Plastic $0.80 per lb. - Direct labor requirements:
Bird House: Fabrication Department 0.40 hr. at $18 per hr. Assembly Department 0.20 hr. at $12 per hr. Bird Feeder: Fabrication Department 0.25 hr. at $18 per hr. Assembly Department 0.10 hr. at $12 per hr. - Estimated factory overhead costs for January:
Indirect factory wages $40,000 Depreciation of plant and equipment20,000 Power and light 10,000 Insurance and property tax 5,000 - Estimated operating expenses for January:
Sales salaries expense $125,000 Advertising expense 80,000 Office salaries expense 40,000 Depreciation expense—office equipment 4,000 Travel expense—selling 25,000 Office supplies expense 2,500 Miscellaneous administrative expense 3,500 - Estimated other revenue and expense for January:
Interest revenue $4,540 Interest expense 3,000 - Estimated tax rate: 25%
Required:
1. Prepare a sales budget for January.
| Birding Homes & Feeders Inc. Sales Budget For the Month Ending January 31 |
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|---|---|---|---|
| Unit Sales Volume |
Unit Selling Price |
Total Sales | |
| Bird house | fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 |
| Bird feeder | fill in the blank 4 | fill in the blank 5 | fill in the blank 6 |
| Total revenue from sales | $fill in the blank 7 |
2. Prepare a production budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Birding Homes & Feeders Inc. Production Budget For the Month Ending January 31 |
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|---|---|---|---|---|
| Units | ||||
| Bird House | Bird Feeder | |||
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fill in the blank 9 | fill in the blank 10 | ||
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fill in the blank 12 | fill in the blank 13 | ||
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fill in the blank 15 | fill in the blank 16 | ||
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fill in the blank 18 | fill in the blank 19 | ||
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fill in the blank 21 | fill in the blank 22 |
3. Prepare a direct materials purchases budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Birding Homes & Feeders Inc. Direct Materials Purchases Budget For the Month Ending January 31 |
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|---|---|---|---|
| Wood | Plastic | Total | |
| Required units for production: | |||
| Bird house | fill in the blank 23 | fill in the blank 24 | |
| Bird feeder | fill in the blank 25 | fill in the blank 26 | |
| Desired units of inventory, January 31 | fill in the blank 27 | fill in the blank 28 | |
| Total units available | fill in the blank 29 | fill in the blank 30 | |
| Estimated units of inventory, January 1 | fill in the blank 31 | fill in the blank 32 | |
| Total units to be purchased | fill in the blank 33 | fill in the blank 34 | |
| Unit price | ×$fill in the blank 35 | ×$fill in the blank 36 | |
| Total direct materials to be purchased | $fill in the blank 37 | $fill in the blank 38 | $fill in the blank 39 |
4. Prepare a direct labor cost budget for January.
| Birding Homes & Feeders Inc. Direct Labor Cost Budget For the Month Ending January 31 |
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|---|---|---|---|---|---|---|
| Fabrication Department |
Assembly Department | Total | ||||
| Hours required for production: | ||||||
| Bird house | fill in the blank 40 | fill in the blank 41 | ||||
| Bird feeder | fill in the blank 42 | fill in the blank 43 | ||||
| Total | fill in the blank 44 | fill in the blank 45 | ||||
| Hourly rate | ×$fill in the blank 46 | ×$fill in the blank 47 | ||||
| Total direct labor cost | $fill in the blank 48 | $fill in the blank 49 | $fill in the blank 50 |
5. Prepare a
| Birding Homes & Feeders Inc. Factory Overhead Cost Budget For the Month Ending January 31 |
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|---|---|
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$fill in the blank 52 |
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fill in the blank 54 |
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fill in the blank 56 |
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fill in the blank 58 |
| Total factory overhead cost | $fill in the blank 59 |
6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $9,000, and work in process at the end of January is estimated to be $10,500. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
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