Variable costs adaptive assignments paper

Pacific Company provides the following information about its budgeted and actual results for June 2013. Although the expected volume for June was 25,000 units produced and sold, the company actually produced and sold 27,000 units.

 

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Budget data – 25,000 units

(asterisks identify factory overhead items):
Selling price $5.00 per unit
Variable costs (per unit of output)
Direct materials 1.24 per unit
Direct labour 1.50 per unit
*Factory supplies 0.25 per unit
*Utilities 0.50 per unit
Selling costs 0.40 per unit
Fixed costs (per month)
*Amortization of machinery $3,750
*Amortization of building 2,500
General liability insurance 1,200
Property taxes on office equipment 500
Other administrative expense 750

 

Actual data – 27,000 units
(asterisks identify factory overhead items):
Selling price $5.23 per unit
Variable costs (per unit of output)
Direct materials 1.12 per unit
Direct labour 1.40 per unit
*Factory supplies 0.37 per unit
*Utilities 0.60 per unit
Selling costs 0.34 per unit
Fixed costs (per month)
*Amortization of machinery $3,710
*Amortization of building 2,500
General liability insurance 1,250
Property taxes on office equipment 485
Other administrative expense 900

 

 

 

 

 

 

Standard manufacturing costs based on expected output of 25,000 units:

 

Per Unit of Output

 

Quantity to be Used

 

Total Cost

Direct materials, 4 grams @ $0.31/g $1.24/unit 100,000 g $31,000
Direct labour, 0.25 hr @$6.00/hr $1.50/unit 6,250 hr 37,500
Overhead $1.00/unit            25,000

 

Actual costs incurred to produce 27,000 units:

 

Per Unit of Output Quantity to be Used Total Cost
Direct materials, 4 grams @ $0.28/g $1.12/unit 108,000 g $30,240
Direct labour, 0.20 hr @$7.00/hr $1.40/unit 5,400 hr 37,800
Overhead

 

Standard costs based on  expected output of 27,000 units:

 

$1.20/unit            32,400

 

 

 

 

          Per Unit of Output       Quantity to be Used Total Cost
Direct materials, 4 grams @ $0.31/g $1.24/unit 108,000 g $33,480
Direct labour, 0.25 hr @$6.00/hr $1.50/unit 6,750 hr 40,500
Overhead                                 26,500
 

Required:

1. Prepare flexible budgets for June showing expected sales, costs, and income under assumptions of 20,000, 25,000, and 30,000 units of output produced and sold.

2. Prepare a flexible budget performance report that compares actual results with the amounts budgeted if the actual volume had been expected.

3. Apply variance analyses for direct materials, and direct labour.

 

 

   

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