Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:
Cost Category Standard Cost per 100 Two-Liter Bottles
Direct labor $3.00
Direct materials 9.00
Factory overhead 0.60
Total $12.60
At the beginning of July, GBC management planned to produce 385,000 bottles. The actual number of bottles produced for July was 389,000 bottles. The actual costs for July of the current year were as follows:
Cost Category Actual Cost for the Month Ended July 31
Direct labor $11,150
Direct materials 33,819
Factory overhead 2,802
Total $47,771
Required:
A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.
B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
C. Interpret the budget performance report.
A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.
Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended July 31, 2016
1
Manufacturing Costs
Standard Cost at Planned Volume (385,000 Bottles)
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total
B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Genie in a Bottle Company
Budget Performance Report
For the Month Ended July 31, 2016
1
Manufacturing Costs
Actual Costs
Standard Cost at Actual Volume (389,000 Bottles)
Cost Varianceâ(Favorable) Unfavorable
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total manufacturing costs
C. Interpret the budget performance report.
The Company's actual costs were $1,243 budgeted. direct labor and direct material cost variances more than offset a small factory overhead cost variance.
Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:
Cost Category Standard Cost per 100 Two-Liter Bottles
Direct labor $3.00
Direct materials 9.00
Factory overhead 0.60
Total $12.60
At the beginning of July, GBC management planned to produce 385,000 bottles. The actual number of bottles produced for July was 389,000 bottles. The actual costs for July of the current year were as follows:
Cost Category Actual Cost for the Month Ended July 31
Direct labor $11,150
Direct materials 33,819
Factory overhead 2,802
Total $47,771
Required:
A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.
B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
C. Interpret the budget performance report.
A. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for GBC, assuming planned production.
Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended July 31, 2016
1
Manufacturing Costs
Standard Cost at Planned Volume (385,000 Bottles)
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total
B. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Genie in a Bottle Company
Budget Performance Report
For the Month Ended July 31, 2016
1
Manufacturing Costs
Actual Costs
Standard Cost at Actual Volume (389,000 Bottles)
Cost Varianceâ(Favorable) Unfavorable
2
Direct labor
3
Direct materials
4
Factory overhead
5
Total manufacturing costs
C. Interpret the budget performance report.
The Company's actual costs were $1,243 budgeted. direct labor and direct material cost variances more than offset a small factory overhead cost variance.
Related questions
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | Cost per Case | |
Cream base | Variable | 100 ozs. | $0.02 | $ 2.00 |
Natural oils | Variable | 30 ozs. | 0.30 | 9.00 |
Bottle (8-oz.) | Variable | 12 bottles | 0.50 | 6.00 |
$17.00 | ||||
DIRECT LABOR | ||||
Department | Cost Behavior | Time per Case | Labor Rate per Hour | Cost per Case |
Mixing | Variable | 20 min | $18.00 | $6.00 |
Filling | Variable | 5 | 14.40 | 1.20 |
25 min. | $7.20 | |||
FACTORY OVERHEAD | ||
Cost Behavior | Total Cost | |
Utilities | Mixed | $600 |
Facility lease | Fixed | 14,000 |
Equipment depreciation | Fixed | 4,300 |
Supplies | Fixed | 660 |
$19,560 | ||
During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 250 more cases than planned at the beginning of the month.Actual data for August were as follows:
Actual Direct Materials | |||
|---|---|---|---|
Price per Unit | Quantity per Case | ||
Cream base | $0.016 per oz. | 102 ozs. | |
Natural oils | $0.32 per oz. | 31 ozs. | |
Bottle (8-oz.) | $0.42 per bottle | 12.5 bottles | |
Actual Direct | Actual Direct Labor | ||
Labor Rate | Time per Case | ||
Mixing | $18.20 | 19.50 min. | |
Filling | 14.00 | 5.60 min. | |
Actual variable overhead | $305.00 |
|---|---|
Normal volume | 1,600 cases |
The prices of the materials were different than standard due tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.
| 1. Determine and interpret the direct materials price andquantity variances for the three materials.
2. Determine the direct labor rate and time variances forthe two departments. Round hours to the nearest tenth of anhour.
3. Determine and interpret the factory overhead controllablevariance.
4. Determine and interpret the factory overhead volumevariance. Round rate to four decimal places.
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Direct Materials, Direct Labor, and Factory Overhead CostVariance Analysis
Eastern Polymers, Inc., processes a base chemical into plastic.Standard costs and actual costs for direct materials, direct labor,and factory overhead incurred for the manufacture of 5,200 units ofproduct were as follows:
| Standard Costs | Actual Costs | ||
| Direct materials | 6,800 lbs. at $5.1 | 6,700 lbs. at $5 | |
| Direct labor | 1,300 hrs. at $17.9 | 1,330 hrs. at $18.2 | |
| Factory overhead | Rates per direct labor hr., | ||
| based on 100% of normal | |||
| capacity of 1,360 direct | |||
| labor hrs.: | |||
| Variable cost, $4.1 | $5,280 variable cost | ||
| Fixed cost, $6.5 | $8,840 fixed cost | ||
Each unit requires 0.25 hour of direct labor.
a. Determine the direct materials pricevariance, direct materials quantity variance, and total directmaterials cost variance.
| Price variance | $ | |
| Quantity variance | $ | |
| Total direct materials cost variance | $ |
b. Determine the direct labor rate variance,direct labor time variance, and total direct labor costvariance.
| Rate variance | $ | |
| Time variance | $ | |
| Total direct labor cost variance | $ |
c. Determine variable factory overheadcontrollable variance, the fixed factory overhead volume variance,and total factory overhead cost variance.
| Variable factory overhead controllable variance | $ | |
| Fixed factory overhead volume variance | $ | |
| Total factory overhead cost variance | $ |
