Questions -
1. All-Star Fender, which uses a standard cost accounting system, manufactured 20,000 boat fenders during the year, using 146,000 feet of extruded vinyl purchased at $1.15 per square foot. Production required 480 direct labor hours that cost $15.00 per hour. The materials standard was 7 feet of vinyl per fender, at a standard cost of $1.20 per square foot. The labor standard was 0.026 direct labor hour per fender, at a standard price of $14.00 per hour.
Requirement - Compute the price and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest All-Star Fender's managers have been making trade-offs? Explain.
2. Top managers of Root Industries predicted 2010 sales of 15,000 units of its product at a unit price of $7.50 Actual sales for the year were 14,100 units at $9.00 each. Variable costs were budgeted at $2.60 per unit, and actual variable costs were $2.70 per unit. Actual fixed costs of $46,000 exceeded budgeted fixed costs by $2,000.
Requirement - Prepare Root's income statement performance report. What variance contributed most to the year's favorable results? What caused this variance?
3. ErgoNow sells its main product, ergonomic mouse pads, for $13 each. Its variable cost is $5.60 per pad. Fixed costs are $200,000 per month for volumes up to 60,000 pads. Above 60,000 pads, monthly fixed costs are $255,000.
Requirement - Prepare a monthly flexible budget for the product, showing sales revenue, variable costs, fixed costs, and operating income for volume levels of 30,000, 45,000, and 80,000 pads.
4. Smithson, Inc., manufactures lead crystal glasses. The standard direct labor time is 1/4 hour per glass, at a price of $15 per hour. The actual results for the production of 6,800 glasses were 1/3 hour per glass, at a price of $14 per hour.
Requirement - Calculate the labor price variance and the labor efficiency variance.