Pacific Company provides the following information about its budgeted and actual results for June 2011. Although the expected June volume was 25,000 units produced and sold, the company actually produced and sold 27,000 units as detailed here:
|
Â
|
Budget
(25,000 units)
|
Actual
(27,000 units)
|
|
Selling price                             Â
|
$5.00 per unit
|
$5.23 per unit
|
|
Variable costs (per unit)
|
Â
|
Â
|
|
Direct materials                        Â
|
1.24 per unit
|
1.12 per unit
|
|
Direct labor                           Â
|
1.50 per unit
|
1.40 per unit
|
|
Factory supplies*Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
|
0.25 per unit
|
0.37 per unit
|
|
Utilities*Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
|
0.50 per unit
|
0.60 per unit
|
|
Selling costs                           Â
|
0.40 per unit
|
0.34 per unit
|
|
Fixed costs (per month)
|
Â
|
Â
|
|
Depreciation—machinery*               Â
|
$3,750
|
$3,710
|
|
Depreciation—building*                 Â
|
2,500
|
2,500
|
|
General liability insurance                Â
|
1,200
|
1,250
|
|
Property taxes on office equipment        Â
|
500
|
485
|
|
Other administrative expense             Â
|
750
|
900
|
Standard costs based on expected output of 25,000 units
|
Â
|
Per Unit
of Output
|
Quantity
to Be Used
|
Total
Cost
|
|
Direct materials, 4 oz @ $031/oz         Â
|
$1.24/unit
|
100,000 oz.
|
$31,000
|
|
Direct labor, 025 hrs @ $600/hr         Â
|
1.50/unit
|
6,250 hrs.
|
37,500
|
|
Overhead                             Â
|
1.00/unit
|
Â
|
25,000
|
Actual costs incurred to produce 27,000 units
|
Â
|
Per Unit
of Output
|
Quantity
to Be Used
|
Total
Cost
|
|
Direct materials, 4 oz @ $028/oz
|
$1.12/unit
|
108,000 oz.
|
$30,240
|
|
Direct labor, 020 hrs @ $700/hr
|
1.40/unit
|
5,400 hrs.
|
37,800
|
|
Overhead
|
1.20/unit
|
Â
|
32,400
|
Standard costs based on expected output of 27,000 units
|
Â
|
Per Unit
of Output
|
Quantity
to Be Used
|
Total
Cost
|
|
Direct materials, 4 oz @ $031/oz         Â
|
$1.24/unit
|
108,000 oz.
|
$33,480
|
|
Direct labor, 025 hrs @ $600/hr         Â
|
1.50/unit
|
6,750 hrs.
|
40,500
|
|
Overhead                             Â
|
Â
|
Â
|
26,500
|
Required
1. Prepare June flexible budgets showing expected sales, costs, and net income assuming 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 analysis for direct materials and direct labor.
4. Compute the total overhead variance, and the controllable and volume variances.
5. Compute spending and efficiency variances for overhead. (Refer to Appendix 24A.)
6. Prepare journal entries to record standard costs, and price and quantity variances, for direct materials, direct labor, and factory overhead.