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Peaceful Dolly

Price: $10.00


Problem 1:
Peaceful Corporation manufactures figurines based on the following information.
Standard costs
$20

Materials (4 ounces at $5)
$8

Direct labor (1 hour per unit)
$4

Variable overhead (based on direct labor hours)


Fixed overhead budget

$19,000
Actual results and costs


Materials purchased


Units
9,000

Cost
$39,600

Materials used in production


Finished product units
2,000

Raw material (ounces)
8,200

Direct labor hours
2,000

Direct labor cost
$20,000

Variable overhead costs
$5,980

Fixed overhead costs
$19,500


Required:

  1. Prepare a performance report for Peaceful using the following headings.
    1. Actual Production Costs
    2. Flexible Budget Costs
    3. Flexible Budget Variances
  2. Compute the following variances (show calculations).
    1. Materials usage variance
    2. Labor rate variance
    3. Labor efficiency variance
    4. Variable overhead spending variance
    5. Variable overhead efficiency variance
    6. Fixed overhead budget variance
  3. Give one possible explanation for each of the six variances computed in part b.

Problem 2:
The following is the current variable costing income statement for Dolly Corporation.
Sales (5,000 units)

$100,000
Variable expenses Cost of goods sold
$35,000

Selling (10% of sales)
$10,000
$45,000
Contribution margin

$55,000
Fixed expenses


Manufacturing overhead
$24,000

Administrative
$12,500
$36,500
Operating income

$18,500
Below is the following information on operations for Dolly Corporation.
Beginning inventory (units)
0
Units produced (units)
6,000
Manufacturing costs

Direct labor (per unit)
$5.00
Direct materials (per unit)
$2.30
Variable overhead (per unit)
$2.40
Required:
Prepare an absorption costing income statement.

Problem 3:
The following information was compiled for two models of cell phones.

3G model
4G model
Average
Budgeted Contribution Margin
$80.00
$120.00
$95.25
Budgeted Sales in Units
28,000
18,000

Actual Sales in Units
28,600
16,500

Required:
Calculate the sales mix variance. (Show your calculations.)

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