The following summary data are from a performance report for Sterling Company for May, during which 7,200 units were produced. The budget reflects the company's normal capacity of 7,500 units. Actual Cost Budget 7,500 units 7,200 units Variances $ Type Direct material Direct labor Variable overhead Fixed overhead $171,000 $175,000 $(4,000) Favorable 346,500 350,000 (3,500) Favorable 123,000 120,000 3,000 Unfavorable 500 Unfavorable Total 90,500 90,000 $731,000 $735,000 $(4,000) a. Prepare a new performance report using flexible budgeting. Round all amounts to the nearest dollar. Direct material Direct labor Variable overhead Fixed overhead Totals Actual Costs Flexible Budget 0 $ 0 $ 0 0 0 0 0 0$ 0 0$ Variance Туре 0 0 0 0 0 b. Which of the two performance reports should Sterling Company management use to measure the company's operating efficiency in May?
The following summary data are from a performance report for Sterling Company for May, during which 7,200 units were produced. The budget reflects the company's normal capacity of 7,500 units. Actual Cost Budget 7,500 units 7,200 units Variances $ Type Direct material Direct labor Variable overhead Fixed overhead $171,000 $175,000 $(4,000) Favorable 346,500 350,000 (3,500) Favorable 123,000 120,000 3,000 Unfavorable 500 Unfavorable Total 90,500 90,000 $731,000 $735,000 $(4,000) a. Prepare a new performance report using flexible budgeting. Round all amounts to the nearest dollar. Direct material Direct labor Variable overhead Fixed overhead Totals Actual Costs Flexible Budget 0 $ 0 $ 0 0 0 0 0 0$ 0 0$ Variance Туре 0 0 0 0 0 b. Which of the two performance reports should Sterling Company management use to measure the company's operating efficiency in May?
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter7: The Master Budget And Flexible Budgeting
Section: Chapter Questions
Problem 8P: Preparing a performance report Use the flexible budget prepared in P7-6 for the 29,000-unit level of...
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
None
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Introduction to flexible budget:
VIEWStep 2: Working note- Determining the cost per unit for the variable costs:
VIEWStep 3: Requirement a- Preparing performance report using flexible budgeting:
VIEWStep 4: Requirement b- Recommending performance report to be used to measure operating efficiency:
VIEWSolution
VIEWStep by step
Solved in 5 steps with 6 images
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
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning