Question

Salisbury Bottle Company 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			$1.20
Direct materials			6.50
Factory overhead			1.80
	Total		$9.50

At the beginning of March, Salisbury’s management planned to produce 500,000 bottles. The actual number of bottles produced for March was 525,000 bottles. The actual costs for March of the current year were as follows:

Cost Category		Actual Cost for the Month Ended March 31
Direct labor						$6,550
Direct materials						33,800
Factory overhead						9,100
	Total					$49,450

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

Salisbury Bottle Company
Manufacturing Cost Budget
For the Month Ended March 31
	Standard Cost at Planned Volume (500,000 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 March. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Salisbury Bottle Company
Manufacturing Costs-Budget Performance Report
For the Month Ended March 31
	Actual Costs	Standard Cost at Actual Volume (525,000 Bottles)	Cost Variance- (Favorable) Unfavorable
Manufacturing costs:
Direct labor	$	$	$
Direct materials
Factory overhead
Total manufacturing cost	$	$	$

Answer 1

Solutions

a. Statement of March manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for Salisbury, assuming planned production.

Salisbury Bottle Company
Manufacturing Cost Budget
For the Month Ended March 31
	Standard Cost at Planned Volume (500,000 Bottles)
Manufacturing costs:
Direct labor	$6,000
Direct materials	32,500
Factory overhead	9,000
Total	$47,500

(b) Statement of budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for March.

Salisbury Bottle Company
Manufacturing Costs-Budget Performance Report
For the Month Ended March 31
	Actual Costs	Standard Cost at Actual Volume (525,000 Bottles)	Cost Variance- (Favorable) Unfavorable
Manufacturing costs:
Direct labor	$6,550	$6,300	$250
Direct materials	33,800	34,125	(325)
Factory overhead	9,100	9,450	(350)
Total manufacturing cost	$49,450	$49,875	$(425)