Frames 220g 300 g660 a7275 48015 dm lenses 310g 600 g

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Frames$2.20/g × 3.00 g6.60a7,27548,015DMLenses$3.10/g × 6.00 g18.60b7,275135,315Direct manuf. labour$15.00/hr. ×1.20 hrs.18.00c7,275130,950Total variable manufacturing costs314,280Fixed manufacturing costs112,500Total manufacturing costs426,780Gross margin$155,220a$49,500 ÷ 7,500 units;b$139,500 ÷ 7,500 units;c$135,000 ÷ 7,500 unitsFlexible-Sales -
ActualResults(1)BudgetVariances(2)=(1)-(3)FlexibleBudget(3)VolumeVariance(4)=(3)-(5)StaticBudget(5)Units sold7,2757,2757,500Revenues$596,550$14,550F$582,000$18,000U$600,000Variable costsDMFrames55,8727,857 U48,0151,485 F49,500DMLenses150,73815,423 U135,3154,185 F139,500Direct manuf. labour145,35514,405U130,9504,050F135,000Total variable costs351,96537,685 U314,2809,720 F324,000Fixedmanuf.costs108,3984,102F112,5000112,500Total costs460,36333,583U426,7809,720F436,500Gross margin$ 136,187$19,033U$155,220$8,280U$163,500Level 2$19,033 U$ 8,280 UFlexible-budget varianceSales-volume varianceLevel 1$27,313 UStatic-budget variance1c.Rate and Efficiency VariancesDMFramesActual grams used = 3.20 per unit × 7,275 units =23,280 gRate per gram = $55,87223,280 = $2.40DMLensesActual grams used = 7.00 per unit × 7,275 units =50,925 gRate per gram = $150,738 50,925 = $2.96Direct LabourActual labour hours= $145,35514.80 = 9,821.3hoursLabour hours per unit = 9,821.37,275 units = 1.35 hoursper unit
Actual CostsIncurred(Actual Input Qty.×Actual Rate)(1)Actual Input Qty.×Budgeted Rate(2)Flexible Budget(Budgeted InputQty. Allowed for Actual Output×Budgeted Rate)(3)DirectMaterials:Frames(7,275 × 3.2 ×$2.40)$55,872(7,275 × 3.2 ×$2.20)$51,216(7,275 × 3.00 ×$2.20)$48,015$4,656 U$3,201 URate varianceEfficiency varianceDirectMaterials:Lenses(7,275 × 7.0 ×$2.96)$150,738(7,275 × 7.0 ×$3.10)$157,868(7,275 × 6.00 ×$3.10)$135,315$7,130 F$22,553 URate varianceEfficiency varianceDirectManuf.Labour(7,275 × 1.35 ×$14.80)$145,355(7,275 × 1.35 ×$15.00)$147,319(7,275 × 1.20 × $15.00)$130,950$1,964 F$16,369 URate varianceEfficiency variance2.Possible explanations for the rate variances are:(a)Unexpected outcomes from purchasing and labour negotiationsduring the year.(b)Higher quality of frames and/or lower quality of lenses purchased.(c) Standards set incorrectly at the start of the year.
(c) Standards set incorrectly at the start of the year.7-38(60 min.)Comprehensive variance analysis review.1.Actual ResultsUnits sold1,400,000Selling price per unit$4.86Revenue$6,804,000Direct materials purchased and used:Total direct materials cost$1,316,000Direct materials per unit$0.94Direct manufacturing labour:Total direct manufacturing labour costs (5,000 $18)$90,000Manufacturing labour-hours of input (1,400,000 280)5,000Labour productivity per hour280Actual manufacturing rate per hour$18.00Direct marketing labour:Total direct marketing costs (1,400,000 $0.36) $504,000Direct marketing cost per unit$0.36Fixed costs ($1,080,000 – $33,000)$1,047,000Static Budgeted AmountsUnits sold1,660,500Selling price per unit$4.80Revenue$7,970,400Direct materials purchased and used:Direct materials per unit$1.02Total direct materials costs$1,693,710Direct manufacturing labour:Direct manufacturing rate per hour$18.00Labour productivity per hour300Manufacturing labour-hours of input (1,660,500 300)5,535Total direct manufacturing labour cost$99,630Direct marketing labourDirect marketing cost per unit$0.36Total direct marketing cost$597,780

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