finance

1.

The following direct materials variance computation is incomplete:

Price variance = (? - $12)x 14,500 pounds + $5,800 U

Efficiency variance = (? – 14, 700 pounds) x $12 = ? F

Flexible budget variance = 3, 400?

Fill in the missing values; identify the flexible budget as favorable or
unfavorable.

2.

Polystar manufactures carpeting. The company charges the following
standard unit costs to production on the basis of static budget volume
of 30,000 linear feet of carpet per month:

Direct materials $2.50

Direct Labor 2.00

Manufacturing overhead 1.50

Standard Unit cost $6.00

Polystar used the following monthly Flexible budget overhead:

Number of
Outputs-(linear feet)


27,000 30,000 33,000

Standard machine hours 2,700
3,000 3,300

Budgeted manufacturing overhead cost:

Variable
$13, 500 $15,000 $16, 500

Fixed
30,000 30,000 30,000

Polystar actually produced 33, 000 linear feet of carpet, using 3100
machine hours. Actual variable overhead was $16,200, and fixed overhead
was $30, 500. Compute the total overhead variance, the overhead flexible
budget variance, and the production volume variance.

3.

Cellular Technologies manufactures capacitors for cellular base stations
and other communications applications. The company’s static budget
income statement for October 20X4 follows. It is based on expected sales
volume of 9,000 units. Cellular Technologies plant capacity is 9,500
units. If an actual volume exceeds 9,500 units, Cellular Technologies
must rent additional space. In that case, salaries will increase by 15%,
rent will double, and insurance expense will increase by 1,000.
Depreciation will be unaffected.

Sales revenue $189,000

Variable expense:

Cost of goods sold 72,000

Sales commissions 9, 450

Shipping expense 4, 500

Fixed expenses:

Salary expense 27, 500

Depreciation expense 13, 250

Rent expense 11,250

Insurance expense 2, 750

Total expense 140, 700

Operating income $48, 300

Prepare flexible budget income statements for 7,500, 9,000 and 11,000
units.

Graph the behavior of the company total costs.

Why might Cellular Technologies managers want to see the graph you
prepared in requirement 2 as well as the columnar format analysis in
requirement 1? What is the disadvantage of the graphic approach in
requirement 2?

4.

Top managers of Wang Industries predicted 20x4 sales of 145,000 units of
its product at a unit price of $7. Actual sales for the year were
140,000 units at $8.50 each. Variable expenses were budgeted at $2.20
per unit, and actual variable expenses were $2.25 per unit. Actual fixed
expenses of $420,000 exceed budgeted fixed expenses by $10,000. Prepare
Wang’s income statement performance report in a format similar to
example given below. What variance contributed most to the year’s
favorable results? What caused this variance?