Calculate the direct materials price, efficiency and flexible budget variances
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
(18) Bello Company produces chairs and has determined the following direct cost categories
and budgeted amounts:
Budget Inputs Budget Cost
Category per unit per input
Direct Materials 3.20 lbs. $7.50 per lb.
Direct Labor 4.0 hours $15.00 per hr.
Budgeted output 4,500 units
Actual performance for the company is shown below:
Actual output: (in units) 4,000
Direct Materials (DM):
DM pounds purchased and used 11,700
Actual price per pound $8.25
Direct Manufacturing Labor (DL):
Actual DL price per hour $15.85
Actual DL cost $268,816
a. Calculate the direct materials price, efficiency and flexible
b. Provide a possible cause or driver for the direct materials price variance. Be specific.
c. Calculate the direct labor price, efficiency, and flexible budget variances.
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