Concept explainers
Use the following information for Problems 9-67 through 9-69:
Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for
Problem 9-69 Performance Report Based on Actual Production
Refer to the information for Healthy Pet Company on the previous page. Assume that Healthy Pet actually produced 100,000 bags of BasicDiet and 90,000 bags of SpecialDiet. The actual overhead costs incurred were as follows:
Required:
- 1. Calculate the number of direct labor hours budgeted for actual production of the two products.
- 2. Prepare a performance report for the period based on actual production.
- 3. CONCEPTUAL CONNECTION Based on the report, would you judge any of the variances to be significant? Can you think of some possible reasons for the variances?
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Chapter 9 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
- Use the following information for Problems 9-67 through 9-69: Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. BasicDiet is a standard mixture for healthy dogs. SpecialDiet is a reduced protein formulation for older dogs with health problems. The two dog foods use common raw materials in different proportions. The company expects to produce 80,000 bags of each product during the coming year. BasicDiet requires 0.20 direct labor hour per bag, and SpecialDiet requires 0.30 direct labor hour per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items: Problem 9-68 Flexible Budget for Various Production Levels Refer to the information for Healthy Pet Company on the previous page. Required: 1. Calculate the direct labor hours required for production that is 10% higher than expected. Calculate the direct labor hours required for production that is 20% lower than expected. 2. Prepare an overhead budget that reflects production that is 10% higher than expected and for production that is 20% lower than expected. (Hint: Use total direct labor hours calculated in Requirement 1.)arrow_forwardSalty Sensations Snacks Company manufactures three types of snack foods: tortilla chips, potato chips, and pretzels. The company has budgeted the following costs for the upcoming period: (QUESTION IN PICTURES)arrow_forwardKrouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing itsoperating budget for the coming year. Selected data regarding the companys two products areas follows: Manufacturing overhead is applied to units using direct labor hours. Variable manufacturing overhead Ls projected to be 25,000, and fixed manufacturing overhead is expected to be15,000. The estimated cost to produce one unit of the laminated putter head is: a. 42. b. 46. c. 52. d. 62.arrow_forward
- Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?arrow_forwardA local picnic table manufacturer has budgeted the following overhead costs: They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown: Recent success has yielded an order for 1,500 tables. Determine how much the job would cost given the following activities, and assuming an hourly rate for direct labor of $25 per hour:arrow_forwardStenback manufactures coffee mugs that it sells to other companies for customizing with their own logos. Stenback prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month: Direct Materials (0.2 lbs @ $0.25 per lb) $0.05 Direct Labor (3 minutes @ $0.10 per minute) 0.30 Manufacturing Overhead: Variable (3 minutes @ $0.06 per minute) $0.18 Fixed (3 minutes @ $0.13 per minute) 0.39 0.57 Total Cost per Coffee Mug $0.92 a.There were no beginning or ending inventory balances. All expenditures were on account. b.Actual production and sales were 62,900 coffee mugs. c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. d. Actual direct labor usage was 202,000 minutes at a total cost of $24,240. e. Actual overhead cost was $10,100 variable and $30,800 fixed. f. Selling and administrative costs were $131,000. Select the…arrow_forward
- Maizy Industries is a producer of baby products. They manufacture two main products: spit-up rags and blankets. The company currently allocates manufacturing overhead to production at a rate of $5.00 per direct labor hour. In order to gain a better understanding of how its products consume overhead resources, the company is considering using activity-based costing for internal planning and decision-making purposes. Two activities have been identified as generating 80% of the total budgeted manufacturing overhead. Information related to the two activities is as follows: Activity Machine Setup Inspection Cost Pool $100,000 $80,000 Cost Driver Activity Level 305 Setups 1,000 Inspection Hours The remaining overhead is attributable to general factory costs and will continue to be allocated based on direct labor hours. If one of the company's products requires 50 setups, 500 inspection hours, and 10,000 direct labor hours, is the product being overcosted or undercosted by the traditional…arrow_forwardPlease explain the answer.arrow_forwardThe Gourmand Cooking School runs short cooking courses at its small campus. Management has Identified two cost drivers it uses in Its budgeting and performance reports-the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 50 students enrolled in those two courses. Data concerning the company's cost formulas appear below: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Revenue Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Courses Students Revenue For example, administrative expenses should be $3,270 per month plus $15 per course plus $4 per student. The company's sales should average $800 per student. Expenses: The company planned to run three courses with a total of 45 students; however, it actually ran three courses with a total of only 42 students. The actual operating results for September were as follows: Instructor…arrow_forward
- The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and thetotal number of students. For example, the school might run two courses in a month and have a total of 50students enrolled in those two courses. Data concerning the company’s cost formulas appear below:Fixed Cost Cost per Cost perper Month Course StudentInstructor wages .................. $3,080Classroom supplies ............. $260Utilities ................................. $870 $130Campus rent ........................ $4,200Insurance ............................. $1,890Administrative expenses ...... $3,270 $15 $4For example, administrative expenses should be $3,270 per month plus $15 per course plus $4 per student.The company’s sales should average $800 per student.The actual operating results for September appear below:ActualRevenue .........................................…arrow_forwardPalladium Inc. produces a variety of household cleaning products. Palladium's controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $86,000 $0.20 Power $0.45 Indirect Labor $140,000 $2.10 Rent $35,000 Next year, Palladium expects production to require 88,000 direct labor hours. Prepare an overhead budget for the expected level of direct labor hours for the coming year.arrow_forwardSaharrow_forward
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