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Children Will Children Willchildren Will Cognitive Development Language Concepts Aesthetic/Affective . ( Theme: Week of: Student: Teacher : ) Fine/Gross Motor Skills Math, Science, Sensory Math/Science/Sensory Social Development Individual Goals Standards Specials Individual Ski Things to Remember Details: Please complete the following exercises and/or problems: · E23-16 · E23-19 · E23-20 · CP23-36 Prepare your answers in an Excel workbook, using one worksheet per exercise or problem. E23-16 Preparing a flexible budget performance report Stenback Pro Company managers received the following incomplete performance report: STENBACK PRO COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2014 Actual Flexible Budget Flexible Sales Static Results Variance Budget Volume Variance Budget Units 39,000 (a) 39,000 3,000 F (g) Sales Revenue $218,000 (b) $218,000 $27,000 F (h) Variable Expenses 84,000 (c) 81,000 10,000 U (i) Contribution Margin $134,000 (d) 137,000 17,000 F (j) Fixed Expenses 108,000 (e) 101,000 0 (k) Operating Income $ 26,000 (f) $36,000 17,000 F (l) Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning. E23-19 Calculating materials and labor variances Great Fender, which uses a standard cost accounting system, manufactured 20,000 boat fenders during 2014, using 144,000 square feet of extruded vinyl purchased at $1.05 per square foot. Production required 420 direct labor hours that cost $13.50 per hour. The direct materials standard was 7 square feet of vinyl per fender, at a standard cost of $1.10 per square foot. The labor standard was 0.025 direct labor hour per fender, at a standard cost of $12.50 per hour. Compute the cost and efficiency variances for direct materials and direct labor. E23-20 Computing overhead variances Review the data from Great Fender given in Exercise E23-19. Consider the following additional information Static budget variable overhead $ 5,500 Static budget fixed overhead $ 22,000 Static budget direct labor hours 550 hours Static budget number of units 22,000 units Great Fender allocates manufacturing overhead to production based on standard direct labor hours. Great Fender reported the following actual results for 2014: actual variable overhead, $4,950; actual fixed overhead, $23,000. Requirements 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. 2. Explain why the variances are favorable or unfavorable P23-36 Calculating materials and labor variances and preparing journal entries This continues the Davis Consulting, Inc. situation from Problem P22-56 of Chapter 22. Assume Davus gas created a standard cost card for each job, Standard direct materials include14 software packages a cost of $900 per package. Standard direct labor costs per job include 90 hours at $120 per hour. Davis plans on completing 12 jobs during March 2013. Actual direct materials costs for March included 90 software packages at a total cost of $81,450. Actual direct labor costs included 100 hours per job at an average rate of $125 per hour. Davis completed all 12 jobs in March. Requirements 1. Calculate direct materials cost and efficiency variances. 2. Calculate direct labor cost and efficiency variances. 3. Prepare journal entries to record the use of both materials and labor for March for the company.

Paper For Above instruction

This comprehensive analysis addresses multiple facets of managerial accounting, focusing on budget performance assessment, variance analysis, and journal entry preparation. The primary goal is to enable managers and accountants to evaluate operational efficiency, cost control, and overall financial performance through meticulous calculations and interpretations. The evaluation begins with a detailed review of a flexible budget performance report, followed by variance analysis in materials and labor, an overhead variance review, and practical journal entries aligned with actuals versus standards. Each section underscores the importance of accuracy and insight in managerial decision-making, ensuring organizations can identify areas of excellence and concern to enhance operational effectiveness.

Analysis of Flexible Budget Performance and Employee Group Evaluation (E23-16)

The flexible budget performance report for Stenback Pro Company provides a snapshot of financial performance compared to planned projections. The actual sales volume was 39,000 units, matching the static budget volume, which simplifies variance analysis. The actual sales revenue of $218,000 aligns exactly with the flexible budget, indicating effective revenue management. However, variances in expenses reveal underlying operational efficiencies and inefficiencies. The variable expenses show a favorable variance of $10,000 (actual $84,000 vs. budget $81,000), implying cost savings, possibly through better procurement or operational efficiencies. Conversely, the contribution margin variance of $17,000 favorably impacts profitability, reflecting effective cost control relative to sales.

Fixed expenses are slightly unfavorable, exceeding budget by $7,000 ($108,000 vs. $101,000), potentially due to unexpected overhead costs or increased fixed costs per activity. Operating income is under budget by $10,000 ($26,000 actual vs. $36,000 budgeted), primarily due to higher fixed expenses. Evaluating employee groups, those responsible for managing fixed costs could be subject to criticism if they fail to contain expenses. Conversely, sales and variable expense management may deserve praise for their favorable variances, suggesting efficient operational practices. Recognizing these variances helps management assign responsibility and motivate departments accordingly.

Materials and Labor Variance Analysis and Standard Cost Evaluation (E23-19)

Great Fender's production of 20,000 boat fenders involved using 144,000 square feet of vinyl at $1.05 per square foot. The standard usage was 7 square feet per fender, with a standard cost of $1.10 per square foot, leading to a total standard vinyl requirement of 140,000 square feet for the actual output. The material variance analysis involves two components: cost variance and efficiency variance.

The cost variance is calculated as the difference between actual and standard cost for the actual quantity used:

Materials Cost Variance = (Actual Price - Standard Price) x Actual Quantity

= ($1.05 - $1.10) x 144,000 = -$0.05 x 144,000 = -$7,200 (Favorable)

The efficiency variance assesses whether the actual usage of vinyl per fender was efficient relative to the standard:

Materials Efficiency Variance = (Actual Quantity Used - Standard Quantity Allowed) x Standard Price

= (144,000 - (20,000 x 7)) x $1.10 = (144,000 - 140,000) x $1.10 = 4,000 x $1.10 = $4,400 (Unfavorable)

Similarly, labor variances are calculated based on standard labor hours and actual hours consumed. The standard labor hours for 20,000 units at 0.025 hours per fender total 500 hours, but actual hours spent were 420 hours, indicating efficiency. The actual labor cost was $13.50 per hour, exceeding the standard cost of $12.50 per hour.

Labor Cost Variance = (Actual Rate - Standard Rate) x Actual Hours

= ($13.50 - $12.50) x 420 = $1.00 x 420 = $420 (Unfavorable)

Labor Efficiency Variance = (Actual Hours - Standard Hours) x Standard Rate

= (420 - 500) x $12.50 = (-80) x $12.50 = -$1,000 (Favorable)

Overall, material and labor variance analysis reveal cost savings due to lower prices and superior efficiency, but slight overuse of materials relative to the standard indicates scope for further efficiency improvements.

Overhead Variance Formalization (E23-20)

Considering the data from Exercise E23-19, the control of manufacturing overhead involves analyzing variable and fixed components. The static budget predicted variable overhead of $5,500 for 550 labor hours, translating to $10 per labor hour, while actual variable overhead incurred was $4,950. The variance here is:

Variable Overhead Cost Variance = Actual - Budgeted

= $4,950 - $5,500 = -$550 (Favorable)

The variance indicates cost savings in variable overhead, possibly due to operational efficiencies or better overhead control.

The variable overhead efficiency variance assesses whether the actual hours used aligned with standards:

Variable Overhead Efficiency Variance = (Actual Hours - Standard Hours for Actual Output) x Standard Rate

= (420 - 500) x $10 = -80 x $10 = -$800 (Favorable)

Fixed overhead variances analyze costs versus budget. The actual fixed overhead was $23,000 compared to a budget of $22,000, leading to a unfavorable variance of:

Fixed Overhead Cost Variance = Actual - Budgeted

= $23,000 - $22,000 = $1,000 (Unfavorable)

The volume variance considers the difference in fixed overhead absorbed based on actual production levels versus planned capacity, which can be calculated if estimated standard hours are used as a baseline. A higher actual fixed overhead than budgeted indicates increased fixed costs or overhead inefficiencies.

Journal Entries for Material and Labor Consumption (P23-36)

For Davis Consulting, Inc., journal entries are needed to record the actual usage of materials and labor, evaluated against standards. The standard costs per job are 14 software packages costing $900 each and 90 hours of labor at $120/hour.

The actual costs were $81,450 for 90 packages, and average labor was 100 hours per job at $125/hour across 12 jobs, totaling 1,200 hours and costs of $15,625.

First, the materials usage and cost are recorded:

Materials Used:

• Debit: Work-in-Process Inventory – Software Packages: $81,450
• Credit: Raw Materials Inventory: $81,450

Next, labor costs are recorded:

• Debit: Work-in-Process Inventory – Labor: $15,000
• Credit: Wages Payable: $15,000

To record the application of standard costs, adjusting entries can be made to recognize variances based on the difference between actual and standard costs, which involves more detailed analysis. Final, actual versus standard variance journal entries facilitate accurate costing and performance evaluation, helping management identify areas for cost control and process improvement.

Conclusion

Effective management accounting requires detailed variance analysis and accurate reporting. The evaluation of flexible budgets, variances, and journal entries provides vital insights into operational efficiencies, cost control, and financial performance. Recognizing favorable and unfavorable variances guides managerial decision-making, fostering continuous improvement efforts. Proper analysis and recording ensure that organizations maintain financial health and competitive advantage in dynamic market conditions, emphasizing the importance of precise cost management and operational accountability.

References

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