WATERWAYS CONTINUING PROBLEM: Waterways Corporation is continuing its budget preparations. Waterways had the following static budget and overhead costs for March.
Waterways Corporation Waterways Corporation
Manufacturing Overhead Budget (Static) Manufacturing Overhead Costs (Actual)
For the Month of March For the Month of March
Budgeted production in units 117,500 Production in units 118,500
Budgeted costs Costs
Indirect materials $ 7,050 Indirect materials $ 7,100
Indirect labor 11,750 Indirect labor 11,825
Utilities 10,575 Utilities 10,700
Maintenance 5,875 Maintenance 5,900
Salaries 42,000 Salaries 42,000
Depreciation 16,800 Depreciation 16,800
Property taxes 2,500 Property taxes 2,500
Insurance 1,200 Insurance 1,200
Janitorial 1,300 Janitorial 1,300
Total budgeted costs $99,050 Total costs $99,325
Waterways produced 118,500 units in March rather than the budgeted number of units.
Instructions
(a) Prepare a flexible overhead budget based on the following amounts produced.
(1) 115,500 units
(2) 116,500 units
(3) 117,500 units
(4) 118,500 units
(5) 119,500 units
(b) Prepare a flexible budget report showing the differences (favorable and unfavorable) in manufacturing overhead costs for the month of March.
(c) Prepare a responsibility report for the manufacturing overhead for March, assuming only variable costs are controllable.
WATERWAYS CONTINUING PROBLEM: Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not "ideal" at this point, but the management is working toward that as a goal. At present, the company uses the following standards.
Materials
Item Per Unit Cost
Metal 1 lb. 58¢ per lb.
Plastic 12 oz. 96¢ per lb.
Rubber 4 oz. 80¢ per lb.
Direct Labor
Item Per Unit Cost
Labor 12 min. $8.00 per hr.
Predetermined overhead rate based on direct labor hours = $4.28
The January figures for purchasing, production, and labor are:
The company purchased 229,000 pounds of raw materials in January at a cost of 74¢ a pound.
Production used 229,000 pounds of raw materials to make 115,500 units in January.
Direct labor spent 15 minutes on each product at a cost of $7.75 per hour.
Overhead costs for January totaled $54,673 variable and $63,800 fixed.
Instructions
Answer the following questions about standard costs.
(a) What is the materials price variance?
(b) What is the materials quantity variance?
(c) What is the total materials variance?
(d) What is the labor price variance?
(e) What is the labor quantity variance?
(f) What is the total labor variance?
(g) What is the total overhead variance?
(h) Evaluate the variances for this company for January. What do these variances suggest to management?