Question

Boyce Manufacturing Co.'s operates 3 profit centers. The clothing center’s static budget at 6,000 units of production includes $30,000 for direct labor, $6,000 for direct materials, $12,000 for variable factory overhead, and controllable fixed costs of $24,000. Actual activity was 5,800 units with actual costs of $29,500 for direct labor, $11,500 for variable factory overhead, controllable fixed costs of $24,200, and $6,100 for direct materials. All units produced were budgeted to be sold for $16 each. Actual sales totaled $93,960. What variance will appear on the performance report for controllable margin?

Choose an answer:

A. 760F

B. 260F

C. 1,100F

D. 900U

Answer 1

Correct Answer is B. 260 F.
The performance report shows the comparision at 5,800 actual units of budget and actual.
Sales Revenue	Actual	-	Budgeted
Actual	$                 93,960	-	$         92,800	=	1160	F
Budgeted			(5,800 x 16)
Costs	Actual	-	Budgeted
Direct Material	$                    6,100	-	$           5,800	=	300	U
Direct Labour	$                 29,500	-	$         29,000	=	500	U
Variable factory overhead	$                 11,500	-	$         11,600	=	100	F
controllable fixed cost	$                 24,200	-	$         24,000	=	200	U
Total cost	$                 71,300	-	$         70,400	=	900	U
Controllable margin	(Sales Revenue - Costs)			=	260	F
Workings:-
Costs			Per unit		Actual units
Direct Material	($ 6,000 / 6000 )	=	$                   1	X	5800	=	$    5,800
Direct Labour	($ 30,000 / 6000 )	=	$                   5	X	5800	=	$ 29,000
Variable factory overhead	($ 12,000 / 6000 )	=	$                   2	X	5800	=	$ 11,600