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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Exercises 9-63 and 9-64:

Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items:

Chapter 9, Problem 64E, Use the following information for Exercises 9-63 and 9-64: Palladium Inc. produces a variety of , example  1

Next year, Palladium expects production to require 90,000 direct labor hours.

Exercise 9-64 Performance Report Based on Actual Production

Refer to the information for Palladium Inc. above. Assume that actual production required 93,000 direct labor hours at standard. The actual overhead costs incurred were as follows:

Chapter 9, Problem 64E, Use the following information for Exercises 9-63 and 9-64: Palladium Inc. produces a variety of , example  2

Required:

Prepare a performance report for the period based on actual production.

To determine

Present a performance report.

Explanation

Overhead Budget:

Overhead budget is a part of operating budget which computes production cost expected to incur within a period other than cost of material and labor.

Preparing performance report by comparing budgeted and actual overhead cost:

Particulars

Budgeted ($)

(A)

Actual ($)

(B)

Variance ($)

(AB)

Maintenance cost104,6001107,0002,400 Adverse
Power41,850241,200650 Favorable
Indirect labor335,3003336,000700 Adverse
Rent35,00035,000No Variance
Total516,750519,2002,450 Adverse

Table (2)

Adverse variance of 2,450 ($516,750$519,200) is observed by comparing budgeted cost and actual cost computed at actual level of activity.

Working Notes:

1. Computation of budgeted maintenance cost:

Cost=Fixedcost+Variablecost=$86,000+($0

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