Question
In: Accounting
McKnight Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. McKnight allocates...
McKnight Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. McKnight allocates overhead based on yards of direct materials. The? company's performance report includes the following selected? data:
|
Static Budget |
Actual Results |
|||||||
|
(1,000 recliners) |
(980 recliners) |
|||||||
|
Sales |
(1,000 recliners x |
$500 |
each) |
$500,000 |
||||
|
(980 recliners x |
$475 |
each) |
$465,500 |
|||||
|
Variable Manufacturing Costs: |
||||||||
|
Direct Materials |
(6,000 yds. @ |
$8.50 |
/ yd.) |
51,000 |
||||
|
(6,143 yds. @ |
$8.30 |
/ yd.) |
50,987 |
|||||
|
Direct Labor |
(10,000 DLHr @ |
$9.30 |
/ DLHr) |
93,000 |
||||
|
(9,600 DLHr @ |
$9.40 |
/ DLHr) |
90,240 |
|||||
|
Variable Overhead |
(6,000 yds. @ |
$5.20 |
/ yd.) |
31,200 |
||||
|
(6,143 yds. @ |
$6.60 |
/ yd.) |
40,544 |
|||||
|
Fixed Manufacturing Costs: |
||||||||
|
Fixed Overhead |
60,600 |
62,600 |
||||||
|
Total Cost of Goods Sold |
235,800 |
244,371 |
||||||
|
Gross Profit |
$264,200 |
$221,129 |
||||||
|
1. |
Prepare a flexible budget based on the actual number of recliners sold. |
|
2. |
Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing? overhead, compute the variable overhead? cost, variable overhead? efficiency, fixed overhead? cost, and fixed overhead volume variances. Round to the nearest dollar. |
|
3. |
Have McKnight?'s managers done a good job or a poor job controlling?materials, labor, and overhead? costs? Why? |
|
4. |
Describe how McKnight?'s managers can benefit from the standard costing system. |
Solutions
Expert Solution
| 1. Flexible Budget For 980 Recliner | |||||||||
| Static Budget (1000 recliner | Flexible Budget (980 Recliner) | Actual Results (980 Recliner) | |||||||
| Quantity | Per Unit | Total | Quantity | Per Unit | Total | Quantity | Per Unit | Total | |
| Sales | 1,000 recliners | $500 | $500,000 | 980 Recliner | $500 | $490,000 | (980 recliners | $475 | $465,500 |
| Variable Manufacturing Costs: | |||||||||
| Direct Materials | 6,000 yds. | $8.50 | 51,000 | 5880 Recliner | $8.50 | $49,980.00 | (6,143 yds. | $8.30 | 50,987 |
| Direct Labor | 10,000 DLHr | $9.30 | 93,000 | 9800 DLH | $9.30 | $91,140.00 | (9,600 DLHr | $9.40 | 90,240 |
| Variable Overhead | 6,000 yds. | $5.20 | 31,200 | 5880 Yds. | $5.20 | $30,576.00 | (6,143 yds. | $6.60 | 40,544 |
| Fixed Manufacturing Costs: | |||||||||
| Fixed Overhead | 60,600 | 60,600 | 62,600 | ||||||
| Total Cost of Goods Sold | 235,800 | $232,296 | 244,371 | ||||||
| Gross Profit | $264,200 | $257,704 | $221,129 | ||||||
| Part-2 | |||||||||
| Computation of Direct Material Price & Quantity Variance | |||||||||
| Direct Material Price variance | (SP-AP)AQ | (8.50-8.30)*6143 | $1,229 | Favourable | |||||
| Direc Material Quantity Variance | (SQ-AQ)SP | (5880-6143)*8.50 | ($2,236) | Unfavourable | |||||
| Computation of Direct Labour Rate & Efficiency Variance | |||||||||
| Direct Labour Rate variance | (SR-AR)*AH | (9.30-9.40)*9600 | ($9,600) | Unfavourable | |||||
| Direct Labour Efficiency Variance | (SH-AH)SR | (9800-9600)*9.30 | $1,860 | Favourable | |||||
| Computation of variable Overhead Rate & Efficiency & Spending Variance | |||||||||
| Direct Variable Overhead Rate Variance | ( SP-AP)*AH | (5.20-6.60)*6143 | ($8,600) | Un Favourable | |||||
| Direct Variable Overhead Efficiency Variance | (SH-AH)SP | (5880-6143)*5.20 | ($1,368) | Un Favourable | |||||
| Direct Variable Overhead Spending Variance | Price variance+ Quantity Variance | ($9,968) | Un Favourable | ||||||
| Computation of Fixed Overhead Rate & Volume & Spending Variance | |||||||||
| Direct Fixed Overhead Rate Variance | Budgeted OH- Actual OH | 264200-221129 | $43,071 | Favourable | |||||
| Direct Fixed Overhead Volume Variance | Standard Rate applied on standard Hour for actual Qty- Budgeted OH | 257704-264200 | ($6,496) | Un Favourable | |||||
| Direct Fixed Overhead Spending Variance | Price variance+ Quantity Variance | $36,575 | Favourable | ||||||
| Part-3 | |||||||||
| a. purchase Manager Done a good Job but Production manager not used material effectively | |||||||||
| b. Manager hire labour at higher price but utilise the labour effectively. | |||||||||
| b. manager has not performed good job to utilise variable overhead at economical price and also not utilise effectively. | |||||||||
| C. Overall saving in Fixed Overhed Cost has been made by manager but not use effectively | |||||||||
| Part-4 | |||||||||
| a. Through Standard costing Statement manager can review their performance and accordingly put more effort to improve it. | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
Robinson Corporation manufactures embroidered jackets. The company prepares flexible budgets and uses a standard cost system...
Robinson Corporation manufactures embroidered jackets. The
company prepares flexible budgets and uses a standard cost system
to control manufacturing costs. The following standard unit cost of
a jacket is based on the static budget volume of 15,000 jackets per
month.
Direct materials (3.0 sq. ft x $5.00 per sq. ft.)
$15.00 Direct labor (2 hours x $12.00 per hour) 24.00
Manufacturing overhead:
-Variable (2 hours x @$1.00 per hour) $2.00
-Fixed (2 hours x $3.00 per hour) 6.00
Total cost...
Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted...
Bluecap Co. uses a standard cost system and flexible budgets for
control purposes. The following budgeted information pertains to
2019:
Denominator volume—number of
units
9,000
Denominator volume—percent of
capacity
90
%
Denominator volume—standard
direct labor hours (DLHs)
27,000
Budgeted variable factory
overhead cost at denominator volume
$
103,700
Total standard factory overhead
rate per DLH
$
15.10
During 2019, Bluecap worked 26,000 DLHs and manufactured 9,100
units. The actual factory overhead cost for the year was $13,000
greater than the...
Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted...
Bluecap Co. uses a standard cost system and flexible budgets for
control purposes. The following budgeted information pertains to
2016:
Denominator volume-number of units
8,000
Denominator volume-percent of capacity
80%
Denominator volume-standard direct labor hours
24,000
Budgeted variable factory overhead cost at the denominator
volume
$103,200
Total standard factory overhead rate per direct labor hour
$15.10
During 2016, Bluecap worked 28,000 direct labor hours and
manufactured 9,600 units. The actual factory overhead was $14,000
greater than the flexible budget amount...
Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted...
Bluecap Co. uses a standard cost system and flexible budgets for
control purposes. The following budgeted information pertains to
2019: Denominator volume—number of units 8,000 Denominator
volume—percent of capacity 80%Denominator volume—standard direct
labor hours (DLHs) 24,000 Budgeted variable factory overhead cost
at denominator volume$103,200 Total standard factory overhead rate
per DLH$15.10 During 2019, Bluecap worked 28,000 DLHs and
manufactured 9,600 units. The actual factory overhead cost for the
year was $14,000 greater than the flexible budget amount for the
units...
Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted...
Bluecap Co. uses a standard cost system and flexible budgets for
control purposes. The following budgeted information pertains to
2019:
Denominator volume—number of units
7,000
Denominator volume—percent of capacity
70
%
Denominator volume—standard direct labor hours (DLHs)
35,000
Budgeted variable factory overhead cost at denominator
volume
$
102,700
Total standard factory overhead rate per DLH
$
15.10
During 2019, Bluecap worked 44,000 DLHs and manufactured 9,000
units. The actual factory overhead cost for the year was $15,000
greater than the...
Wallis Company manufactures only one product and uses a standard cost system. The company uses a...
Wallis Company manufactures only one product and uses a standard
cost system. The company uses a predetermined plantwide overhead
rate that relies on direct labor-hours as the allocation base. All
of the company's manufacturing overhead costs are fixed—it does not
incur any variable manufacturing overhead costs. The predetermined
overhead rate is based on a cost formula that estimated $2,892,000
of fixed manufacturing overhead for an estimated allocation base of
289,200 direct labor-hours. Wallis does not maintain any beginning
or ending...
Phoenix Company manufactures only one product and uses a standard cost system. The company uses a...
Phoenix Company manufactures only one product and uses a
standard cost system. The company uses a plantwide predetermined
overhead rate that relies on direct labor-hours as the allocation
base. The predetermined overhead rate is based on a cost formula
that estimated $2,887,200 of fixed and variable manufacturing
overhead for an estimated allocation base of 240,600 direct
labor-hours. Phoenix does not maintain any beginning or ending work
in process inventory.
The company’s beginning balance sheet is as follows:
Phoenix Company
Balance...
Wallis Company manufactures only one product and uses a standard cost system. The company uses a...
Wallis Company manufactures only one product and uses a standard
cost system. The company uses a predetermined plantwide overhead
rate that relies on direct labor-hours as the allocation base. All
of the company's manufacturing overhead costs are fixed—it does not
incur any variable manufacturing overhead costs. The predetermined
overhead rate is based on a cost formula that estimated $2,886,000
of fixed manufacturing overhead for an estimated allocation base of
288,600 direct labor-hours. Wallis does not maintain any beginning
or ending...
Fine Oak Furniture manufactures high-quality wooden desks and uses a standard cost system. A standard cost...
Fine Oak Furniture manufactures high-quality wooden desks and
uses a standard cost system. A standard cost card for one model of
desk, the “heritage”, developed for 2019, is shown below:
Standard Cost per Unit:
Model: Heritage
Standard
Standard
Standard
Quantity
Price/Rate
Cost
Direct Materials
75
BF x
$ 0.45
per BF
=
$33.75
Direct Labour
1.25
Hrs x
$18.00
per Hr
=
$22.50
Variable Manufacturing Overhead
1.25
Hrs x
$4.00
per Hr
=
$5.00
Fixed Manufacturing Overhead
1.25
Hrs x...
Fine Oak Furniture manufactures high-quality wooden desks and uses a standard cost system. A standard cost...
Fine Oak Furniture manufactures high-quality wooden desks and
uses a standard cost system. A standard cost card for one model of
desk, the “heritage”, developed for 2019, is shown below:
Standard Cost per Unit:
Model: Heritage
Standard
Standard
Standard
Quantity
Price/Rate
Cost
Direct Materials
75
BF x
$ 0.45
per BF
=
$33.75
Direct Labour
1.25
Hrs x
$18.00
per Hr
=
$22.50
Variable Manufacturing Overhead
1.25
Hrs x
$4.00
per Hr
=
$5.00
Fixed Manufacturing Overhead
1.25
Hrs x...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- identify one intrapersonal relationship and evaluate its component.
- Using Python in vs code: The distribution of letters in a document has a distinctive and...
- Why is De Beers exploring the diamond reselling market? How does the creation of IIDV affect...
- programming in Python The body mass index (BMI) is calculated as a person’s weight (in lb)...
- 1. Show the steps in merging A and B into C where A= 8, 12, 19,...
- 1. Given the following information, determine the beta coefficient for Stock L that is consistent with...
- Generate the first ten rows of Pascal triangle using MATLAB. Post code in the response
ADVERTISEMENT