Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 118,000 liters at a budgeted price of $210 per liter this year. The standard direct cost sheet for one liter of the preservative follows. (2 pounds @ $13) (0.5 hours @ $42) Direct materials $26 21 Direct labor Variable overhead is applied based on direct labor hours. The variable overhead rate is $110 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $55 per unit. All non-manufacturing costs are fixed and are budgeted at $2.1 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $648,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $23,798 Less variable costs Direct materials 2,578 2,360 5,830 $10,768 $13,030 Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs 1,140 1,320 Total fixed costs $ 2,460 Operating profit $10,570 During the year, the company purchased 194,000 pounds of material and employed 49,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances.
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 118,000 liters at a budgeted price of $210 per liter this year. The standard direct cost sheet for one liter of the preservative follows. (2 pounds @ $13) (0.5 hours @ $42) Direct materials $26 21 Direct labor Variable overhead is applied based on direct labor hours. The variable overhead rate is $110 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $55 per unit. All non-manufacturing costs are fixed and are budgeted at $2.1 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $648,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $23,798 Less variable costs Direct materials 2,578 2,360 5,830 $10,768 $13,030 Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs 1,140 1,320 Total fixed costs $ 2,460 Operating profit $10,570 During the year, the company purchased 194,000 pounds of material and employed 49,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 8P: Carlo Lee Corp. has established the following standard cost per unit:
Although 10,000 units were...
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Concept explainers
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.
Question
Transcribed Image Text:Paynesville Corporation manufactures and sells a preservative used in food and drug
manufacturing. The company carries no inventories. The master budget calls for the
company to manufacture and sell 118,000 liters at a budgeted price of $210 per liter
this year. The standard direct cost sheet for one liter of the preservative follows.
(2 pounds @ $13)
(0.5 hours @ $42)
Direct materials
$26
Direct labor
21
Variable overhead is applied based on direct labor hours. The variable overhead rate
is $110 per direct-labor hour. The fixed overhead rate (at the master budget level of
activity) is $55 per unit. All non-manufacturing costs are fixed and are budgeted at $2.1
million for the coming year.
At the end of the year, the costs analyst reported that the sales activity variance for the
year was $648,000 unfavorable.
The following is the actual income statement (in thousands of dollars) for the year.
Sales revenue
$23,798
Less variable costs
Direct materials
2,578
2,360
5,830
Direct labor
Variable overhead
$10,768
$13,030
Total variable costs
Contribution margin
Less fixed costs
Fixed manufacturing overhead
Non-manufacturing costs
Total fixed costs
1,140
1,320
$ 2,460
Operating profit
$10,570
During the year, the company purchased 194,000 pounds of material and employed
49,400 hours of direct labor.
Required:
a. Compute the direct material price and efficiency variances.
b. Compute the direct labor price and efficiency variances.
c. Compute the variable overhead price and efficiency variances.
(For all requirements, enter your answers in whole dollars. Indicate the effect of
each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no
effect, do not select either option.)
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