Chapter 22, Problem 22.3EX

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

Chapter
Section

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

Budget performance reportGenie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage in­dustry. The cost standards per 100 two-liter bottles are as follows: Cost Category Standard Cost per 100 Two-Liter Bottles Direct labor $2.00 Direct materials 9.10 Factory overhead 0.55 Total$11.65 At the beginning of July, GBC management planned to produce 400,000 bottles. The actual number of bottles produced for July was 406,000 bottles. The actual costs for July of the current year were as follows: Cost Category Actual Cost for the Month Ended July 31 Direct labor $7,540 Direct materials 35,750 Factory overhead 2,680 Total$45,970 A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, 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.

A.

To determine

Manufacturing cost budget:

Manufacturing cost budget is a budget comprised of the budgeted costs for materials purchases, direct labor, and factory overhead, which are determined by multiplying their standard costs per unit by the planned level of production.

Budget performance report:

A budget performance report is the summary of the differences between the actual costs, and the standard costs for the units produced. When the actual cost is less than the standard cost, then it is favorable cost variance. When the actual cost is more than the standard cost, then it is unfavorable cost variance.

To prepare: The July manufacturing standard cost budget for Company GB assuming planned production.

Explanation

Prepare the July manufacturing standard cost budget for Company GB assuming planned production.

 Company GB Manufacturing Cost Budget For the Month Ended July 31 Â Standard Cost at Planned Volume (400,000)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â  Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Bottles) Manufacturing costs: Â Direct laborÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â  (1) $8,000 Direct materialsÂ Â Â Â Â Â Â Â Â Â (2) 36,400 Factory overheadÂ Â Â Â Â Â Â Â (3) 2,200 Total manufacturing costs$ 46,600

Table (1)

Working notes:

DirectÂ laborÂ =Â StandardÂ costÃ—PlannedÂ levelÂ ofÂ production=Â \$2

B.

To determine

To prepare: A budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July.

C.

To determine

To interpret: The budget performance report.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started