Exercise 16-46 (Static) Fixed Cost Variances (LO 16-6) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor Sales revenue Less variable costs Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Direct materials Direct labor Variable overhead Total variable costs Contribution margin (2 pounds @ $4) (0.5 hours @ $24) Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs Operating profit $8 12 $7,238 748 1,010 930 $2,688 $4,550 1,050 1,230 $2,280 $2,270
Exercise 16-46 (Static) Fixed Cost Variances (LO 16-6) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor Sales revenue Less variable costs Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Direct materials Direct labor Variable overhead Total variable costs Contribution margin (2 pounds @ $4) (0.5 hours @ $24) Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs Operating profit $8 12 $7,238 748 1,010 930 $2,688 $4,550 1,050 1,230 $2,280 $2,270
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
Please do not give solution in image format thanku
Transcribed Image Text:Required:
What are the fixed overhead price and production volume variances for Paynesville? (Enter your answers in whole dollars. Indicate
the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Answer is not complete.
Fixed overhead price variance
Fixed overhead production volume variance
U
U
Transcribed Image Text:Exercise 16-46 (Static) Fixed Cost Variances (LO 16-6)
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no
inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this
year. The standard direct cost sheet for one liter of the preservative follows.
Direct materials
Direct labor
Sales revenue
Less variable costs
Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead
rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the
coming year.
At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable.
The following is the actual income statement (in thousands of dollars) for the year.
Direct materials
Direct labor
Variable overhead
Total variable costs
(2 pounds @ $4)
(0.5 hours @ $24)
Contribution margin
Less fixed costs
Fixed manufacturing overhead
Non-manufacturing costs
Total fixed costs
Operating profit
$ 8
12
$7,238
748
1,010
930
$2,688
$4,550
1,050
1,230
$2,280
$2,270
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education