Problem 1. Indicate whether each of the following variances is favorable or unfavorable. The first one has been done as an example.
Item to classify Standard Actual Type of Variances
materials cost $2.90 per pound $3.00 per pound
materials usage 91,000 pounds 90,000 pounds
labor cost $10.00 per hour $9.60 per hour
labor usage 61,000 hours 61,800 hours
fixed cost spending $400,000 $390,000
fixed cost per unit (vol) $3.20 per unit $3.16 per unit
sales volume 40,000 42,000 units
sales price $3.20 per unit $3.63 per unit
Problem 2. Compute variances for the following items and indicate whether each variance is favorable (f) or unfavorable (u)
Budget Actual Variance F or U
SalesPrices $650 $525
Sales revenue $580,000 $600,00
Cost of Goods Sold $385,00Â $360,000
Material Purchase at 5,000 pounds $275,000 $280,000
Materials Usuage $180,000 $178,000
Wages at 4,000 hours $60,000 $58,700
Labor usage at $16 per hour $96,000 $97,000
Research & Development expense$22,000 $25,000
Selling and administrative expenses$49,000 $40,00
Problem 3. Sexton Manufacturing Company established the following standard price and cost data.
Sales price $8.00 per unit
Variable manufacturing cost 4.00 per unit
Fixed manufacturing costs 3,000 total
Fixed selling and administrative costs 1,000
Sexton planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units.
Determining sales and variable cost volume variances
a. Determine the sales and variable cost volume variances.
b. Classify the variances as favorable (F) or unfavorable (U)
c. Comment on the usefulness of the variances with respect to performance evaluation and identify the member of the management team most likely to be responsible for these variances.
d. Determine the amount of fixed cost that will appear in the flexible budget.
e. Determine the fixed cost per unit based on planned activity and the fixed cost per unit based on actual activity. Assuming Sexton uses information in the master budget to price the company's product, comment on how the volume could affect the company's profitability
Problem 4. Sexton Manufacturing Company established the following standard price and cost data.
Sales price $8.00 per unit
Variable manufacturing cost 4.00 per unit
Fixed manufacturing costs 3,000 total
Fixed selling and administrative costs 1,000
Sexton planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units.