ACC 1820 Project 5 Name__________________________________
Overview: The connect assignment provides a Fixed Budget and Actual Income Statement for Phoenix Company’s year ending December 31, XXXXXXXXXXConnect asks you to flex the budget and prepare a Budget Performance Report. The Project asks students to determine the DM, DL and VOH standards using the information and then analyze the variances in more detail. The project has student update standards for the next year and create a master budgeted income statement.
Use the information for Phoenix Company used in Question 6 of connect assignment HW 5 to complete the requirements of the project.
1) Phoenix Company budget amounts are prepared using standards. Follow the instructions provided in (a) through (e) to complete the Standard Card below.
Phoenix Company
Standard Cost Card – Cu
ent Year (2019)
Qty per Unit
Cost per Input
Std. Cost per Unit (a)
Direct materials
4.00
lbs.
x
Direct labo
hrs.
12.10
Variable Overhead
hrs.
x
a) Use the Budget expenses (Fixed/Planning or flexible budget) and the number of units to calculate the Standard cost per unit. Show 2 decimals. Include your calculated amounts in the last column for direct material, direct labor, and variable overhead. Note: For variable overhead, you will need to add all variable overhead costs togethe
) Phoenix Company sets its material standard at 4 pounds of raw material per unit of finished goods. Calculate the standard cost per pound (input) for direct material as the cost per unit divided by 4. This is the standard price per pound of raw material. Include it in the standard cost card above. Show 2 decimals.
c) Phoenix Company estimated its standard labor rate at $12.10 per hour. Calculate the standard number of direct labor hours to complete one unit of finished goods. Note: Cost per unit (a) divided by XXXXXXXXXXInclude the standard in the table above. Show 2 decimals.
d) Phoenix Company applies its overhead based on direct labor hours. Include the standard hours of variable overhead in the standard card above. Show 2 decimals.
e) Calculate the standard variable overhead rate and include it in the standard cost card. Variable overhead cost per unit divided by standard overhead hours. Show 2 decimals.
This is your Check Point. Text/email your Cost Card for 1 to Teri for early review before continuing with the project requirements.
2) With respect to direct material, calculate the following relating to their operating results for the year.
a) Assume Phoenix Company paid an average of $15.00 (actual price, AP) a pound for its raw material during the year. How many pounds of raw material did they use? Hint: Actual direct material expenses (connect income statement) divided by 15. Round to the nearest whole number of pounds. Use this as your actual quantity, AQ, for the calculation of DM variances below.
) Using the standard cost card and the flexible budget, how many pounds should Phoenix Company have used? Round to the nearest whole number of pounds. Use this as standard quantity, SQ, for the calculations of DM variances below.
c) Complete the following table to calculate the direct material price and quantity variances.
Direct Material Variances
Actual Cost
66000
-21000
Standard Cost
AQ
x
AP
AQ
x
SP
SQ
x
SP
x
15.00
x
x
45000
Favorable/Unfavorable
Direct material price variance
Direct material quantity variance
Total direct material variance
d) Give a possible reason for a favorable material price variance. Explain using 20 to 30 words.
e) Give one possible reason for an unfavorable material quantity variance. Explain using 20 to 30 words.
3) With respect to direct labor, calculate the following relating to Phoenix Company’s operating results for the year.
a) Assume Phoenix Company concluded it spent an average of 0.90 hours (Actual) to complete one finished good unit. How many hours of direct labor did Phoenix Company have for the year? Hint: Multiply the number of units produced by 0.90 hours. Round to the nearest whole number of hours. Use this amount as actual hours, AH, in the calculation of DL variances below.
) Using the standard cost card (1 above) and the flexible budget, how many hours should Phoenix Company have used for production during the year? Round to the nearest whole number of hours. Use this amount as standard hours, SH, in the calculation of DL variances below.
c) What was the company’s average direct labor wage rate? Hint: Calculate as direct labor expense divided by total direct labor hours. Show 2 decimals. Use this as standard rate, SR, in the calculation of DL variances below.
d) Complete the following table to calculate the direct labor rate and efficiency variances.
Direct Labor Variances
Actual Cost
66000
-21000
Standard Cost
AH
x
AR
AH
x
SR
SH
x
SR
x
x
x
45000
Favorable/Unfavorable
Direct labor rate variance
Direct labor efficiency variance
Total direct labor variance
e) Give one possible reason for an unfavorable labor rate variance. Explain using 20 to 30 words.
f) Give one possible reason for a favorable labor efficiency variance. Explain using 20 to 30 words.
4) With respect to variable overhead, calculate the following relating to their operating results for the year.
a) Remember Phoenix Company applies overhead (variable and fixed) based on direct labor hours. Therefore, the total quantity of input (hours) for variable overhead will equal those of direct labor. Calculate an average variable overhead actual rate as variable overhead expenses divided by direct labor hours (actual). Show 2 decimals. Use this as your actual rate, AR, to calculate spending and efficiency variance below.
Variable Overhead Variances
Actual Variable OH Costs
66000
Flexible Budget
-21000
Standard Cost (VOH applied)
AH
x
AR
AH
x
SR
SH
x
SR
x
x
x
45000
Favorable/Unfavorable
Variable OH spending variance
Variable OH efficiency variance
Total variable OH variance
) Give one possible reason for a favorable variable overhead spending variance. Explain using 20 to 30 words.
c) Give one possible reason for an unfavorable variable overhead efficiency variance. Explain using 20 to 30 words.
5) For fixed overhead, calculate how much fixed overhead would have been applied. Remember that overhead (fixed and variable) is applied based on a standard or predetermined rate for a budgeted level of activity.
a) Calculate portion of the predetermined rate relating to fixed overhead using the table below using budgeted overhead costs and standard hours of labor expected for “PLANNED/BUDGETED” production level.
Fixed Overhead Pre-Determined Rate
Budgeted Fixed Overhead Costs
Add Depreciation-Plant equipment, fixed utilities, and plant management salaries from connect
Budgeted DL hours
Calculate: budgeted # of units (connect) x standard hours per unit in 1
Predetermined Fixed OH Rate
Calculate: Costs divided by hours
) When a manufacturing company uses standard costing, its overhead is applied based on STANDARD HOURS for the actual number of units produced. For Phoenix Company, this is the standard hours calculated in 3b above. Use these standard hours to calculate the amount of fixed overhead applied below.
Standard hours from 3b above _________________
x predetermined rate from 5a _________________
Total Fixed OH applied _________________
c) Calculate and summarize Recalculate the Direct Labor Variances using the “co
ected” information. You may want to reference your calculation on Q13 of HW 5. Make sure you indicate whether the variance is favorable or unfavorable and show your work.
Fixed Overhead Variances
Actual Fixed OH Costs
66000
Budgeted Overhead
-21000
Standard Cost (FOH applied)
45000
Favorable/Unfavorable
Fixed OH spending variance
Fixed OH volume variance
Total fixed overhead variance
d) Summarize the components of overhead controllable variance in the table below.
Favorable/Unfavorable
Variable OH spending variance
Variable OH efficiency variance
Fixed OH spending variance
Total OH controllable variance
e) Give one possible reason for a favorable fixed overhead spending variance. Explain using 20 to 30 words.
f) Give one possible reason for an unfavorable fixed overhead volume variance. Explain using 20 to 30 words.
6) For this question, only consider the four variances (ONLY Variances for material and labor) (1) Materials Price Variance, (2) Material Quantity Variance, (3) Labor Rate Variance, and (4) Labor Efficiency Variance. Answer the questions relating to each situation below.
a) Situation A: One of Phoenix Company’s full-time employees took an extended sick leave amounting to 160 hours. A temporary employee was hired at $14.50 an hour as a replacement.
i) Which of the 4 variances was impacted?
ii) Would the situation impact the variance Favorable or Unfavorable?
iii) Estimate of impact. Show your work for partial credit.
) Situation B: Power outages occu
ed three times during the year in which all production was shut down for 2 hours the first time, 3 hours the second time, and 1 hour the third time. During these times, 4 workers remained on site, but no work was performed.
i) Which of the 4 variances would this situation impact?
ii) Would the situation impact the variance Favorable or Unfavorable?
iii) Estimate of impact. Show your work for partial credit.
c) Situation C: An order of raw material was received damaged, presumably during shipping. The order contained enough raw material to produce 200 finished goods. Upon inspection, 8% of the raw material was deemed contaminated and not usable.
i) Which of the 4 variances would this situation impact?
ii) Would the situation impact the variance Favorable or Unfavorable?
iii) Estimate of impact. Show your work for partial credit.
d) Situation D: The purchasing department was able to negotiate a $1,200 discount from the supplier for the damaged order from c) above.
i) Which of the 4 variances would this