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nesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no entories. The master budget calls for the company to manufacture and sell 122,000 liters at a budgeted price of $240 per liter this ar. The standard direct cost sheet for one liter of the preservative follows. irect materials (2 pounds @ $15) (0.5 hours @ $46) $30 irect labor 23 riable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead e (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for coming year. the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. e following is the actual income statement (in thousands of dollars) for the year. ales revenue ess variable costs Direct materials Direct labor $28,138 2,998 2,660 7,130 Variable overhead $12,788 $15,350 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 $12,850 "perating profit ring the vear, the company purchased 198.000 pounds of material and emploved 51.400 hours of direct labor.

nesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no entories. The master budget calls for the company to manufacture and sell 122,000 liters at a budgeted price of $240 per liter this ar. The standard direct cost sheet for one liter of the preservative follows. irect materials (2 pounds @ $15) (0.5 hours @ $46) $30 irect labor 23 riable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead e (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for coming year. the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. e following is the actual income statement (in thousands of dollars) for the year. ales revenue ess variable costs Direct materials Direct labor $28,138 2,998 2,660 7,130 Variable overhead $12,788 $15,350 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 $12,850 "perating profit ring the vear, the company purchased 198.000 pounds of material and emploved 51.400 hours of direct labor.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 9CE: Budgeted unit sales for the entire countertop oven industry were 2,500,000 (of all model types), and...
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Exercise 16-36 (Algo) Variable Cost Variances (LO 16-5) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 122,000 liters at a budgeted price of $240 per liter this year. The standard direct cost sheet for one liter of the preservative follows. (2 pounds @ $15) (0.5 hours @ $46) Direct materials $30 Direct labor 23 Variable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $28,138 Less variable costs Direct materials 2,998 2,660 7,130 $12,788 $15,350 Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 Operating profit $12,850 During the year, the company purchased 198,000 pounds of material and employed 51,400 hours of direct labor.
Transcribed Image Text:Exercise 16-36 (Algo) Variable Cost Variances (LO 16-5) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 122,000 liters at a budgeted price of $240 per liter this year. The standard direct cost sheet for one liter of the preservative follows. (2 pounds @ $15) (0.5 hours @ $46) Direct materials $30 Direct labor 23 Variable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $28,138 Less variable costs Direct materials 2,998 2,660 7,130 $12,788 $15,350 Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 Operating profit $12,850 During the year, the company purchased 198,000 pounds of material and employed 51,400 hours of direct labor.
Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) a. Direct materials: Price variance Efficiency variance b. Direct labor: Price variance Efficiency variance с. Variable overhead: Price variance Efficiency variance
Transcribed Image Text:Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) a. Direct materials: Price variance Efficiency variance b. Direct labor: Price variance Efficiency variance с. Variable overhead: Price variance Efficiency variance
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