Concept explainers
Preparing a flexible budget and computing
Learning Objectives 1, 2, 3, 4
2. VOH Eff.Var.$1,377 U
McKnight Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. McKnight allocates
Sales | (1,025 recliners x 5500 each)(1,005 recliners x $495 each) | $512,500 | $497,475 |
Variable |
|||
Direct Materials | (6,150 yds.@$8.50yard) | $2,275 | |
(6,300 yds.@$8.30yard) | $2,290 | ||
Direct Labor | (10,250 DLH@$9.20/DLHr) | 94,300 | |
(9,850 DLHr@$9.40/DLHr) | 92,590 | ||
Variable Overhead | (6,150 yds.@55.10/yard) | 31,345 |
(6,300 yds. @$6.50/yard) 40,950
Fixed Manufacturing Costs:
Fixed Overhead | 62,730 | 64,730 |
Total Cost of Goods Sold | 240,670 | 250,560 |
Gross Profit | $271,830 | $246,915 |
Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
3. Have McKnight’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why’
4. Describe how McKnight’s managers can benefit from the standard cost system,
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Horngren's Accounting (12th Edition)
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