Question

EX23-03

Budget Performance Report

Genie 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			$1.16
Direct materials			5.8
Factory overhead			0.3
	Total		$7.26

At the beginning of July, GBC management planned to produce 430,000 bottles. The actual number of bottles produced for July was 464,400 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						$5,279
Direct materials						26,289
Factory overhead						1,407
	Total					$32,975

Enter all amounts as positive numbers.

a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.

Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended March 31
	Standard Cost at Planned Volume (430,000 Bottles)
Manufacturing costs:
Direct labor	$
Direct materials
Factory overhead
Total	$

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to two decimal places.

Genie in a Bottle Company
Manufacturing Costs-Budget Performance Report
For the Month Ended March 31
	Actual Costs	Standard Cost at Actual Volume (464,400 Bottles)	Cost Variance- (Favorable) Unfavorable
Manufacturing costs:
Direct labor	$	$	$
Direct materials
Factory overhead
Total manufacturing cost	$	$	$

c. The Company's actual costs were $740.44   than budgeted.   direct labor and direct material cost variances more than offset a small   factory overhead cost variance.

Answer 1

a. The standard cost per 100 bottles is given in the question. We have to calculate cost per 430,000 bottles as per the planned budget.

Genie in a bottle company
Manufacturing cost budget
For the month ended July 31
		Cost per 100 bottles	Standard cost at planned volume
			(430,000 bottles)
Manufacturing costs:
Direct labour		1.16	4988	(430,000/100) x 1.16
Direct materials		5.8	24940	(430,000/100) x 5.8
Factory overhead		0.3	1290	(430,000/100) x 0.3
Total		$7.26	31218
b. We see that the actual		production is	different from the	budgeted, so we calculate	cost for actual volume
and thereby calculate the		variance as	follows:
Genie in a bottle company
Manufacturing cost - Budget Performance Report
For the month ended July 31
		Actual Costs	Standard cost at actual volume	Cost Variance- (Favourable) Unfavourable
			(464,400 bottles)
Manufacturing costs:
Direct labour		5,279	5387.04	-108.04	(464,400/100) x 1.16
Direct materials		26,289	26935.20	-646.20	(464,400/100) x 5.8
Factory overhead		1,407	1393.20	13.80	(464,400/100) x 0.3
Total		32,975	33715.44	-740.44