Golden Food Products produces special- formula pet food. The company carries no inventories. The master budget calls for the company to manufacture and sell 132,000 cases at a budgeted price of $72 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials (3 pounds @ $2) $6 Direct labor (0.25 hours @ $32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $40 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $18 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.8 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $384,000 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 132,000 cases at a budgeted price of $72 per case this year. The standard direct cost sheet for one case of pet food follows: Direct materials (3 pounds @ $2) $6 Direct labor (0.25 hours @ $32) 8 Variable overhead is applied based on direct labor-hours. The variable overhead rate is $40 per direct labor-hour. The fixed overhead rate (at the master budget level of activity) is $18 per unit. All nonmanufacturing costs are fixed and are budgeted at $2.8 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $384,000 favorable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
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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 132,000
cases at a budgeted price of $72 per case
this year. The standard direct cost sheet for
one case of pet food follows: Direct
materials (3 pounds @ $2) $ 6 Direct labor
(0.25 hours @ $32) 8 Variable overhead is
applied based on direct labor-hours. The
variable overhead rate is $40 per direct
labor-hour. The fixed overhead rate (at the
master budget level of activity) is $18 per
unit. All nonmanufacturing costs are fixed
and are budgeted at $2.8 million for the
coming year. At the end of the year, the
costs analyst reported that the sales activity
variance for the year was $384,000
favorable.
Transcribed Image Text:Required:
Note: Enter your answers in thousands of dollars.
Sales revenue
Variable costs:
GOLDEN FOOD PRODUCTS
Flexible Budget
(thousands of dollars)
Direct materials
Direct labor
Variable overhead
Total variable costs
Contribution margin
Fixed costs:
Fixed overhead
Marketing
Total fixed costs
Operating profits
$
$
$
$
0
0
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