Managerial Accounting Case ‘Waltham Motors Division’ Answer 1: Breakeven point If Waltham Motors Division sells 13‚326 units‚ it will breakeven. But why Waltham incurred net losses when it sold more than 13‚326 units in May? The unfavorable cost variances (see answer 2 and 3) and Waltham’s high operating leverage were major reasons for its financial problems. Waltham’s operating leverage is 3.85 times‚ which indicates that the operating income is very sensitive to changes in sales. Answer 2: Total
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format. · The first issue of concern is in the direct materials budget‚ it appears to be missing the total direct materials budget. There is a raw materials budget and a components budget present‚ but the two are never combined to complete the direct materials budget. On the surface this omission does not appear to be particularly egregious. However‚ omitting a total for direct materials can confuse the evaluation of how much money is going just to materials. · The second issue of concern can be found
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Exam II I. TRUE / FALSE 1. A budget generally includes both financial and nonfinancial aspects of the plan. 2. The revenues budget should be based on the production budget. 3. A favorable variance should be ignored by management. 4. The direct manufacturing labor price variance is likely to be unfavorable if lower-skilled workers are put on a job. 5. For fixed overhead costs‚ the flexible-budget amount is always the same as the static-budget amount. II. MULTIPLE CHOICE
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and shipping? Answer Q2: Direct Materials $6.00 Direct Labor $16.00 Overhead Variable $13.11 $4.89 Fixed $8.22 Period Costs Variable* $7.82 $1.60 Fixed $6.22 * Shipping costs are to be considered Period Costs‚ not Overhead Cost because these costs are reported on the income statement as they are incurred. They are not part of manufacturing overhead‚ nor related to making the product. Direct Materials $108‚000.00 Direct Materials Unit Cost = ---------------------------
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3.0 Variance Analysis 3.1 Flexible-Budget Variance Analysis In Barnes Scuba Diving case‚ the main comparison for the flexible-budget variance analysis would be between the actual results and flexible budget. Static budget would not be useful for this comparison due to the different sales unit output which may result in a misleading and inaccurate result comparison. With reference to the Flexible Budget Section attached in Annex X‚ Flexible-Budget Variance for Revenues was identified to be a favourable
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any over or under applied overhead. Direct labor = $100‚000. Beginning balance of stores (direct materials) = $20‚000. Ending balance of stores = $20‚000. Purchased $50‚000 of direct materials during period. Beginning balance of work in process = $300‚000. Ending balance of work in process = $300‚000. Cost of goods sold = $350‚000. Finished goods beg. inventory = $100‚000. Finished goods ending inventory = $200‚000. ____1. Direct materials used are: (a) $20‚000 (b)
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Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June‚ 28‚000 units of direct materials are purchased at a cost of $4.70 per unit‚ and 28‚000 units of direct materials are used to produce 9‚000 units of Product B. Compute the total materials variance and the price and quantity variances. Total materials variance $ ____ Materials price variance $ ____ Materials quantity variance $ ____ Repeat (a)‚ assuming the purchase price is $5.20
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work 780 direct labour-hours each month and produce 2600 robes. The standard costs associated with this level of production are as follows: | | Total | Per Unit of Product | Direct materials | $ | 53248 | $ 20.48 | Direct labour | $ | 8320 | 3.20 | Variable manufacturing overhead (based on direct labour-hours) | $ | 3120 | 1.20 | | | | | | | | $ 24.88 | | | | | | During April‚ the factory worked only 760 direct labour-hours
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budget and variance. [2] State the formulas for determining direct materials and direct labor variances. [3] State the formula for determining the total manufacturing overhead variance. II. Standard and variance Standard is the norm (e.g. standard number of years to get a college degree; standard number of hours to get a good night’s sleep; standard amount of time spent to pass CPA‚ etc). Variance is the difference between the actual and the standard (Favorable variance vs. unfavorable
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COMPREHENSIVE PROBLEM 6 Utease Corporation 60 Strong This problem covers various topics from Chapters 22‚ 23‚ 24‚ and 25. Students are asked to prepare budget schedules‚ calculate variances‚ determine possible causes for differences between budgeted and actual results‚ and to perform ROI analysis. Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 60 Minutes‚ Strong COMPREHENSIVE PROBLEM 6
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