Question

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			$1.12
Direct materials			5.9
Factory overhead			0.32
	Total		$7.34

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						$5,097
Direct materials						26,742
Factory overhead						1,501
	Total					$33,340

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 July 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. If required, round your answers to nearest cent.

Genie in a Bottle Company
Manufacturing Costs-Budget Performance Report
For the Month Ended July 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 $746.96 than budgeted. direct labor and direct material cost variances more than offset a small factory overhead cost variance.

Answer 1

Answer a.
Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended July 31
Manufacturing Costs	Standard Cost at Planned Volume (430,000 Bottles)
Direct Labor - $1.12 X 430,000/100	4,816.00
Direct Materials - $5.90 X 430,000/100	25,370.00
Factory Overhead - $0.32 X 430,000/100	1,376.00
Total	31,562.00
Answer b.
Genie in a Bottle Company
Budget Performance Report
For the Month Ended July 31
Manufacturing Costs	Actual Costs	Standard Cost at Planned Volume (464,400 Bottles)	Cost Variance
Direct Labor	5,097.00	5,201.28	104.28	(F)
		$1.12 X 464,400/100
Direct Materials	26,742.00	27,399.60	657.60	(F)
		$5.90 X 464,400/100
Factory Overhead	1,501.00	1,486.08	14.92	(U)
		$0.32 X 464,400/100
Total	33,340.00	34,086.96	746.96	(F)
Answer c.
TRUE
The company is having favourable variance in Direct Labor and Direct Materials Costs which offsets the unfavorable variance of Factory Overhead.