Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 124,500 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials Direct labor (3 pounds @ $2) (0.25 hours @ $32) $6 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable.
Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 124,500 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials Direct labor (3 pounds @ $2) (0.25 hours @ $32) $6 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products:
Sales revenue
Less variable costs.
Direct materials
Direct labor
Variable overhead
Total variable costs.
Contribution margin
Less fixed costs
Fixed manufacturing overhead
Nonmanufacturing costs
Total fixed costs
Operating profit
$ 12,300
818
1,010
533
$ 2,361
$9,939
1,825
2,134
$ 3,959
$ 5,980
During the year, the company purchased 324,500 pounds of material and employed 33,760 hours of direct labor.
Required:
a. Compute the direct materials price and efficiency variances.
b. Compute the direct labor price and efficiency variances.
c. Compute the variable overhead price and efficiency variances.
Note: For all requirements, 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.
Transcribed Image Text:Golden Food Products produces special-formula pet food. The company carries no inventories. The master budget calls for the
company to manufacture and sell 124,500 cases at a budgeted price of $60 per case this year. The standard direct cost sheet for one
case of pet food follows:
Direct materials
Direct labor
(3 pounds @ $2)
(0.25 hours @ $32)
$6
8
Variable overhead is applied based on direct labor-hours. The variable overhead rate is $16 per direct labor-hour. The fixed overhead
rate (at the master budget level of activity) is $10 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.2 million for the
coming year.
At the end of the year, the costs analyst reported that the sales activity variance for the year was $336,000 favorable.
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