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Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true?

A. Fixed costs would show favorable variances.

B. Fixed costs would show unfavorable variances.

C. Variable costs would show favorable variances.

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Joshua Stredder
Joshua StredderLv10
27 Jan 2021

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Please answer all sections and please show all work.

Norwall Company's variable manufacturing overhead should be $1.95 per standard machine-hour
and its fixed manufacturing overhead should be $51,336 per month.
The following information is available for a recent month:
a.

The denominator activity of 28,520 machine-hours is used to compute the predetermined overhead rate.
b.

At the 28,520 standard machine-hours level of activity, the company should produce 12,400 units of product.
c. The company�s actual operating results were:
Number of units produced 13,390
Actual machine-hours 29,780
Actual variable manufacturing overhead cost $ 53,604
Actual fixed manufacturing overhead cost $ 50,900
Required:
1.

Compute the predetermined overhead rate and break it down into variable and fixed cost elements.

Predetermined overhead rate

Variable element

fixed element

2.

Compute the standard hours allowed for the actual production.

3.

Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Variable overhead rate variance

Variable overhead efficiency variance

Fixed overhead budget variance

Fixed overhead volume variance

11. A static budget report is appropriate for

a. evaluating a manager’s performance in controlling variable costs.

b. fixed manufacturing costs and fixed selling and administrative expenses.

c. variable costs and fixed costs.

d. none of the above.
12. The flexible budget report includes all of the following sections except

a. cost data for variable and fixed costs .

b. data for excess of contribution margin over controllable fixed costs (controllable margin).

c. production data for a selected activity index.

d. All of the choices are included in a flexible budget report.


13. At 40,000 direct labor hours, the flexible budget for indirect labor is $160,000. If $172,000 of indirect labor costs are incurred at 44,000 direct labor hours, the flexible budget report should show the following difference for indirect labor.

a. $12,000 favorable.
b. $4,000 unfavorable.

c. $4,000 favorable.

d. $12,000 unfavorable.


14. Controllable fixed costs are deducted from the contribution margin to arrive at

a. income from operations.

b. net income.

c. controllable margin.
d. realized income.


15. The numerator in computing return on investment is

a. controllable margin.

b. average operating assets.

c. contribution margin.
d. net assets.

Orchid Ltd. is a small furniture manufacturer. It was established as a family-owned business 30 years ago and prides itself on high-quality products. Most of its products are made to order as a result of direct orders from Internet-based sales. Typically the company has been profitable, operating at the top end of the market; recently, however, costs appear to have been increasing and the company has also seen a decline in its sales. The workforce is highly skilled and recently several of the experienced craftspeople who make the products have retired, and the company has had problems recruiting, training and retaining suitably skilled employees. One of its products, a table, has the following standard costs:

£
Direct materials (8m @ £30/m) 240.00
Direct labour (10 hours @ £25/hr) 250.00
Fixed overheads 160.00
650.00
Selling price 950.00
Standard profit margin 300.00

The table is made from solid oak and the above materials reflect the size of the table in square metres. The labour required to make the table is highly skilled.

The monthly production and sales are planned to be 800 units. The actual results for March were as follows:

£
Sales revenue 753,300
Less
Direct materials (192,500) (7,000m)
Direct labour (221,000) (8500 hours)
Fixed overheads (130,000)
Operating profit 209,800

There were no opening or closing stocks. The company manufactured and sold 810 tables; this is more than budgeted due to a successful marketing campaign.

Required

Parts 1 and 2 should be submitted as an operating statement, as per your Key Concept Overview, and within the Business Report as required for part 3.

Calculate the flexed and actual budget.

Calculate the following variances:

Sales variances; volume and price

Direct material variances; usage and price

Direct labour variances; efficiency and rate

Fixed overhead variance; spending

Present the above information as a part of a Business Report, providing possible explanations for the variances that you have calculated and suggestions as to how the company might try to improve its cost control.

This assignment should be around 1,000 words for the main body of your Business Report

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