Question

#9

Lenci Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,100 units, but its actual level of activity was 5,050 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

	Fixed element per month			Variable element per unit
Revenue		-		$	39.60
Direct labor	$	0		$	5.50
Direct materials		0			15.70
Manufacturing overhead		41,500			1.30
Selling and administrative expenses		22,700			0.20
Total expenses	$	64,200		$	22.70

Actual results for May:

Revenue	$	197,810
Direct labor	$	28,565
Direct materials	$	80,265
Manufacturing overhead	$	47,905
Selling and administrative expenses	$	22,680

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for May would be closest to:

Garrison 16e Rechecks 2018-06-07

$2,750 F

$3,595 F

$3,595 U

$2,750 U

#10

Neubert Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,300 units, but its actual level of activity was 5,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

	Fixed Element per Month			Variable element per unit
Revenue		-		$	30.00
Direct labor	$	0		$	3.50
Direct materials		0			10.40
Manufacturing overhead		33,300			1.50
Selling and administrative expenses		25,000			0.50
Total expenses	$	58,300		$	15.90

Actual results for December:

Revenue	$	156,340
Direct labor	$	17,980
Direct materials	$	56,566
Manufacturing overhead	$	41,040
Selling and administrative expenses	$	28,870

The direct labor in the planning budget for December would be closest to:

Garrison 16e Rechecks 2018-06-07

$18,690

$18,550

$17,845

$17,980

#16

Pippin Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs	Standard Quantity or Hours per Unit of Output			Standard Price or Rate
Direct materials		5.0	grams	$	7.00	per gram
Direct labor		0.30	hours	$	21.30	per hour
Variable manufacturing overhead		0.30	hours	$	9.60	per hour

The company has reported the following actual results for the product for June:

Actual output		8,500	units
Raw materials purchased		48,100	grams
Actual price of raw materials	$	7.70	per gram
Raw materials used in production		42,490	grams
Actual direct labor-hours		2,300	hours
Actual direct labor rate	$	21.70	per hour
Actual variable overhead rate	$	9.80	per hour

The labor rate variance for the month is closest to:

$1,020 U

$920 U

$1,020 F

$920 F

Answer 1

Solution 9:

Freemont corporation
Flexible Budget Performance Report
For the month ended June 30
Particulars	Actual results	Revenue and spending variances		Flexible Budget
Nos of units	5050			5050
Revenue	$197,810.00	$2,170.00	U	$199,980.00
Costs:
Direct labor	$28,565.00	$790.00	U	$27,775.00
Direct material	$80,265.00	$980.00	U	$79,285.00
Manufacturing overhead	$47,905.00	$160.00	F	$48,065.00
Selling and administrative expenses	$22,680.00	$1,030.00	F	$23,710.00
Total expenses	$179,415.00	$580.00	U	$178,835.00
Net Income	$18,395.00	$2,750.00	U	$21,145.00

The overall revenue and spending variance for may = $2,750 U

Hence last option is correct.

Solution 10:

Direct labor in planning budget = Planned units * Direct labor cost per unit = 5300 * $3.50 = $18,550

Hence 2nd option is correct.

Solution 11:

labor rate variance = (SR - AR) * AH

= ($21.30 - $21.70) * 2300 = $920 U

Hence 2nd option is correct.