Question

In: Accounting

Dan LLC makes and sells plastic fish ponds for the landscaping industry. The company expected to...

Dan LLC makes and sells plastic fish ponds for the landscaping industry. The company expected to produce and sell 14,000 ponds during 2014. Due to production problems, only 11,000 ponds were actually produced and sold during 2014. The following information is made available:

Production data for 2014

Standard

Actual

$

$

Selling price per unit (i.e. per pond)

95

110

Direct material cost per unit

60

80

Direct labor cost per unit

25

15

Fixed costs:

Fixed manufacturing overhead

50,000

70,000

Required:

  1. Using the template below, prepare pro-forma income statements for the static budget, flexible budget and actual results for year ended December 31, 2014. Use your results to compute the flexible budget variances, indicating whether each variance is favorable or unfavorable.  

Pond LLC

Income Statements for year to 12/31/2014

Static budget

Flexible budget

Actual results

Flexible budget variances

Favorable or unfavorable

F or UF

Units (ponds)

14,000 units

?

?

$

$

$

$

Sales

?

?

?

?

?

Variable costs

Direct materials

?

?

?

?

?

Direct labor

?

?

?

?

?

Contribution margin

?

?

?

?

?

Fixed costs

?

?

?

?

?

Fixed manufacturing overhead

Net Income/loss

?

?

?

?

?
  1. Pond’s accountant asks you to prepare the flexible budget variances for direct material. You are provided with the following standard and actual data for plastic, the company’s only direct material:

Pricing and usage data for plastic during 2014

Standard

Actual

Purchase price for each pound of plastic

$6 per pound

$4 per pound

Quantity of plastic needed per pond

10 pounds

20 pounds

Actual units/ponds produced during 2014

11,000 ponds

Prepare the following flexible budget variances for material, clearly indicating whether each variance is favorable or unfavorable:

  1. Material price variance

  1. Material usage variance

  1. The total flexible budget cost variance for material (i.e. the total material cost variance)

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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