MBA 620 Week 6 Homework - Shane McClellan

docx

School

Western Michigan University *

*We aren’t endorsed by this school

Course

620

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by DeaconSnake481

Shane McClellan MBA620 HW Week 6 MBA 620 Week 6 Homework 1. Templeton Corporation produces ice cream machines. Last year, Templeton sold 40,000 machines. Unit sales are expected to increase 10 percent each year. Average sales price per machine will remain at $200. Assume finished goods inventory is maintained at a level equal to 5 percent of the next quarter’s sales. Finished goods inventory at the end of last year was 2,300 units. a) What is Templeton Corporation’s sales budget for this year? Last year, Templeton sold 40,000 machines and are expected to increase sales by 10% this year. Number of machines to be sold this year = 40,000×(1+0.10)40,000×(1+0.10) = 40,000×1.1040,000×1.10 = 44,000 machines Sales budget = Number of machines to be sold this year x Average sales price per machine Sales budget = 44,000 machines x $200/machine Sales budget = $8,800,000 b) What is Templeton Corporation’s production budget for this year? Quarter 1: 44,000×14=11,00044,000×41=11,000 units Quarter 2: 11,000 units Quarter 3: 11,000 units Quarter 4: 11,000 units Quarter 1 Ending Inventory = 11,000×0.05=55011,000×0.05=550 units (5% of Q2 sales) Quarter 2 Ending Inventory = 11,000×0.05=55011,000×0.05=550 units (5% of Q3 sales) Quarter 3 Ending Inventory = 11,000×0.05=55011,000×0.05=550 units (5% of Q4 sales) Quarter 4 Ending Inventory = 11,000×0.05=55011,000×0.05=550 units (5% of Q1 sales for next year, which will be 11,000 units + 10% of 11,000 units = 12,100 units) Thus, for each quarter: Units to be produced=Units to be sold+Required ending inventory−Beginning inventory Q1 Production: 11,000+550−2,300=9,25011,000+550−2,300=9,250 units Q2 Production: 11,000+550−550=11,00011,000+550−550=11,000 units Q3 Production: 11,000+550−550=11,00011,000+550−550=11,000 units Q4 Production: 11,000+550−550=11,00011,000+550−550=11,000 units Templeton’s production budget would be 42,250 unites produced. 2. Giantage Corporation produces windows used in residential construction. The company expects to produce 44,550 units next year. With regards to direct materials, each unit of product requires 12 square feet of glass at a cost of $1.50 per square foot. With regards to direct labor, each unit of product requires 2 labor hours at a cost of $15/hour. The following information relates to the manufacturing overhead budget. Variable Overhead Costs Indirect materials $2.50 per unit Indirect labor $3.20 per unit Other $1.70 per unit Fixed Overhead Costs

Shane McClellan MBA620 HW Week 6 Salaries $50,000 Rent $60,000 Depreciation $36,000 a) Calculate the direct materials budget for Giantage. Direct materials budget = Expected number of units to be produced * Direct materials required per unit * Cost of direct materials per unit Direct materials budget = 44,550 units * 12 square feet/unit * $1.50/square foot Direct materials budget = $801,900 Therefore, the direct materials budget for Giantage is $801,900. b) Calculate the direct labor budget for Giantage. Direct Labor Budget = 44,550 units × 2 hours/unit × $15/hour Direct Labor Budget = 44,550 units × 2 hours/unit × $15/hour = 89,100 hours × $15/hour = $1,336,500 Therefore, the direct labor budget for Giantage is $1,336,500. c) Calculate the manufacturing overhead budget for Giantage. Direct Labor Budget = (Expected units to be produced) × (Labor hours required per unit) × (Cost of labor per hour) Direct Labor Budget = 44,550 units × 2 hours/unit × $15/hour = 89,100 hours × $15/hour = $1,336,500 Therefore, the direct labor budget for Giantage is $1,336,500.

Shane McClellan MBA620 HW Week 6 3. Civil Engineers, LLC, has five engineers who design and maintain wetlands. The company had the following net income for the most current year. Civil Engineers, LLC Income Statement YE December 31, 20XX Service revenue $1,185,000 Operating expenses: Engineer salaries $480,000 Biologist salaries $200,000 Administrative staff wages $80,000 Supplies $92,000 Rent $56,000 Utilities $16,000 Insurance $112,000 Miscellaneous $52,000 Total operating expenses $1,088,000 Net income (loss) $97,000 The following information was gathered from management to help prepare this coming year’s budgeted income statement:  Service revenue will increase 3 percent.  Existing engineer and biologist salaries will increase 5 percent, and a new biologist will be hired at the beginning of the year, at a salary of $40,000.  Administrative staff wages will increase 15 percent.  Supplies and rent will remain the same.  Utilities will increase 8 percent.  Insurance will increase 20 percent.  Miscellaneous expenses will decrease 5 percent. Prepare a budgeted annual income statement for Civil Engineers, LLC Income Statement – Civil Engineers, LLC Revenue Service revenue $1,221,900 (Increase of 3% from 2023) Expenses Engineer salaries $504,000 (Increase of 5% from 2023) Biologist salaries $260,000 (Increase of 5% from 2023, plus $40,000 for new biologist) Administrative wages $92,000 (Increase of 15% from 2023) Supplies $92,000 (Same) Rent $56,000 (Same) Utilities $17,280 (Increase of 8% from 2023) Insurance $134,400 (Increase of 20% from 2023) Miscellaneous expenses $49,400 (Decrease of 5% from 2023) Total expenses $1,194,480 Net income $27,4

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Shane McClellan MBA620 HW Week 6 4. Hal’s Heating produces furnaces for commercial buildings. The company’s master budget shows the following standards information. Expected production for January: 300 furnaces Direct materials 3 heating elements at $40 per element Direct labor 35 hours per furnace at $18 per hour Variable manufacturing overhead 35 direct labor hours per furnace at $15 per hour a) Calculate the standard cost per unit for direct materials, direct labor, and variable manufacturing overhead. Direct Materials 3 heating elements at $40 per element = $120 Direct Labor 35 hours per furnace at $18 per hour = $630 Variable Manufacturing Overhead 35 direct labor hours per furnace at $15 per hour = $525 Total Standard Cost per Unit $120 + $630 + $525 = $1,275 b) Assume Hal’s Heating produced 320 furnaces during January. Prepare a flexible budget for direct materials, direct labor, and variable manufacturing overhead. If Hal’s produces s320 furnaces in Januray, Standard cost for direct materials per furnace = $120 For 320 furnaces: Total budgeted cost for direct materials = 320 furnaces x $120 per furnace = $38,400 Standard cost for direct labor per furnace = $630 For 320 furnaces: Total budgeted cost for direct labor = 320 furnaces x $630 per furnace = $201,600 Variable Manufacturing Overhead: Standard cost for variable manufacturing overhead per furnace = $525 For 320 furnaces: Total budgeted cost for variable manufacturing overhead = 320 furnaces x $525 per furnace = $168,000

Shane McClellan MBA620 HW Week 6 5. Sweets Company produces boxes of chocolate. Sweets purchased and used 2,200 pounds of chocolate during the month of April for $4.80 per pound. A standard of 2 pounds of material is expected to be used for each box produced, at a cost of $5 per pound. Sweets produced 1,000 boxes of chocolate during the month of April. a) Calculate the direct materials price variance for the month of April. Direct materials price variance = (Standard price per unit - Actual price per unit) x Actual quantity used Direct materials price variance = ($5 per pound - $4.80 per pound) x 2,200 pounds = $440 favorable variance b) Calculate the materials quantity variance for the month of April. Materials quantity variance = (Standard quantity per unit - Actual quantity used) x Standard price per unit Materials quantity variance = (2 pounds - 2,200 pounds) x 5 per pound = -10,990 The quantity variance is $10,900 unfavorable for the month of April

Shane McClellan MBA620 HW Week 6 6. Tech Company produces computer servers. The company’s standards show an expected direct labor rate of $20 per hour and that each server will require 10 hours of direct labor. Tech’s direct labor workforce worked 3,200 hours to produce 300 units during the month of August for a total direct labor cost of $70,400. a) Calculate the labor rate variance for the month of August. Clearly indicate if the variance is favorable or unfavorable. Labor rate variance = (Actual labor rate - Standard labor rate) x Actual labor hours Actual labor rate = Total direct labor cost / Actual labor hours = $70,400 / 3,200 hours = $22 per hour Standard labor rate = $20 per hour Labor rate variance = ($22 - $20) x 3,200 hours = $6,400 Tech company’s labor rate variance for August is $6,400 unfavorable. b) Calculate the labor efficiency variance for the month of August. Clearly indicate if the variance is favorable or unfavorable Labor efficiency variance = (Standard labor hours - Actual labor hours) x Standard labor rate Standard labor hours = Number of units produced x Standard labor hours per unit = 300 units x 10 hours per unit = 3,000 hours Labor efficiency variance = (3,000 hours - 3,200 hours) x $20 per hour = -$4,000 unfavorable Tech company’s August labor efficiency variance is $4000 unfavorable. 7. Tech Company produces computer servers. Variable overhead is allocated to each server based on a standard of $100 per machine hour and 3 machine hours per server. A total of 850 machine hours were used during the month of August to produce 300 servers. Variable overhead costs totaled $96,050 for the month.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Shane McClellan MBA620 HW Week 6 a) Calculate the variable overhead spending variance for the month of August. Clearly indicate if the variance is favorable or unfavorable. Budgeted variable overhead costs = Standard variable overhead rate per unit * Actual production Budgeted variable overhead costs = $100 per machine hour * 3 machine hours per server * 300 servers = $90,000 The actual variable overhead costs are $96,050. Variable overhead spending variance = $96,050 - $90,000 = $6,050 The variable overhead spending variance for August is $6,050 unfavorable. b) Calculate the variable overhead efficiency variance for the month of August. Clearly indicate if the variance is favorable or unfavorable. Variable overhead efficiency variance = (Actual production * Standard machine hours per unit) - Actual machine hours Budgeted machine hours = 300 servers * 3 machine hours per server = 900 machine hours Variable overhead efficiency variance = (300 servers * 3 machine hours per server) - 850 machine hours = 50 favorable The variable overhead efficiency variance for August was favorable by 50 machine hours

Shane McClellan MBA620 HW Week 6 8. Rain Gear, Inc., produces rain jackets. The master budget shows the following standards information and indicates the company expected to produce and sell 28,000 units for the year. Variable manufacturing overhead is allocated based on direct labor hours. Direct materials 4 yards per unit at $3 per yard Direct labor 2 hours per unit at $10 per hour Variable mfg OH 2 direct labor hours per unit at $4 per hour Rain Gear actually produced and sold 30,000 units for the year. During the year, the company purchased and used 130,000 yards of material for $429,000. A total of 65,000 labor hours were worked during the year at a cost of $637,000. Variable overhead costs totaled $231,000 for the year. a) Provide a flexible budget of production costs for the year Variable Standard variable cost per unit Actual production quantity Flexible budget amount Direct materials $3 per yard 30,000 yards $90,000 Direct labor $10 per hour 65,000 hours $650,000 Variable manufacturing overhead $4 per direct labor hour 65,000 direct labor hours $260,000 Total $1,000,000 b) Calculate the materials price variance and materials quantity variance. Enter your calculations into the table below to present your findings: Actual Flexible budget Budget Variance Price Varianc e Quantity Variance $429,000 $90,000 339,900 38,700 301,300 Materials price variance is $339,000 unfavourable.

Shane McClellan MBA620 HW Week 6 c) Calculate the labor rate variance and labor efficiency variance. Enter your calculations into the table below to present your findings: Actual Flexible budget Budget Variance Rate Variance Efficienc y Variance DL $637,000 $650,000 $13000 0 $13,000 Labor rate variance is 0, so Rain Gear managed to pay their workers exactly what was the standard cost predicted. Labor efficiency variance is $13,000 favorable. d) Calculate the variable overhead spending variance and variable overhead efficiency variance. Enter your calculations into the table below to present your findings: Actual Flexible budget Budget Variance Spend Variance Efficienc y Variance VOH $231,000 $260,000 $29,000 $19,000 $10,000 Variable overhead spending variance = (Actual variable overhead costs - Flexible budget variable overhead costs) = ($231,000 - $260,000) = $29,000 unfavorable e) Company policy is to investigate all variances greater than 10 percent of the flexible budget amount for each of the three variable production costs: direct materials, direct labor, and variable overhead. Identify which of the six variances calculated in requirements b through e should be investigated.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Shane McClellan MBA620 HW Week 6 The Direct materials price variance, direct materials quanity variance, variable overhead spending variance and the variable overhead efficiency variance should be investigated. f) Provide two possible explanations for each variance identified in requirement e . The Direct materials price variance: a. Due to rising market prices, the company paid more for materials than planned. b. The company bought goods from a new supplier that charged more. direct materials quantity variance: a. Due to production inefficiencies, the company used more materials than planned. b. The company used higher-quality materials than budgeted, requiring extra per unit. variable overhead efficiency variance: a. The company used more direct labor hours than it had budgeted to produce the same number of units, which resulted in higher variable overhead costs. b. The company produced a higher percentage of complex products than it had budgeted, which required more direct labor hours and resulted in higher variable overhead costs.

MBA 620 Week 6 Homework - Shane McClellan

Related Documents