29 Jun Question Pacific Company provides the followin
Question
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.
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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