Surrey Bikes, Inc. manufactures double bench bikes for resorts and other vacation properties. Management now wants the accountants to complete an analysis to compare the budgeted costs to standard costs for 2021. During the year 2021, the company completed 680 bikes. Let's discuss changes from budget and standard that occurred during 2021. Overall, the company was able to increase several efficiencies. However, the company also experienced some increased costs. Use this information to complete the CH24 Budet Variances tab; the green section. Electrical Parts Direct Materials The purchase price, net of discounts increase by $2.50 per set. There was also an increase in freight of by $0.25 per set. Wheel Sets Direct Materials: The company was able to secure the same wheel sets from a new supplier at a cost of $37/set. However, freight cost increased by $0.50 per wheel set. Metal Parts Direct Materials: The company was also able to reduce the amount of material used for each bike by 3 pounds. The acual cost of the metal parts was $0.52 per pound. Canvas Fabric Direct Materials: The company was also able to reduce the amount of material used for each bike by one-half a yard. The acual cost of the canvas fabric was $4.95 per yard. Direct labor: Employees were tasked with increasing equipment assembly and decreasing labor hours. They were successful in 2021 and brought hours down by 5/hours/unit! The company provided a $1/hour raise! This also lead to an increase of $0.25/hour in payroll taxes. Manufacturing overhead: There were no changes in manufacturing overhead, no variance needs to be computed Using this information, computer the budget variances incurred during 2021. 22 Add: Desired ending finished goods units (ending balance 2021)23 Total required units24 Less: Beginning finished goods units (ending balance 2020)| 25 Required production units2627Management expects to end 2020 with some direct materials. They want to make sure that at the end of 2021, they have enough directmaterials on hand to start production right away in 2022.|28Expected2021 CostEnding Balance Ending Balance2021Per Unit2920201 set1 set$$30 Electrical sets direct materials:95.005015031 Wheels direct materials - set of 432 Metal parts direct materials:33 Canvas fabric direct materials:40.0025150200 pounds$0.501,0005,0002003 yards$10.002034Surrey Bikes, Inc.Direct Materials BudgetFor the Year Ended December 31, 20213536373839 Required production units40 Electrical sets per unit produced:41 Total needed for production42 Add: Desired ending direct materials (ending balance 2021)43 Total materials required44 Less: Beginning direct materials (ending balance 2020)45 Direct materials purchases46 Cost per set47 Total cost of electrical sets direct materials purchases4849 Required production units50 Wheel sets per unit produced: material sets per unit produced:51 Total wheel sets needed for production52 Add: Desired ending direct materials (ending balance 2021)53 Total materials required54 Less: Beginning direct materials (ending balance 2020)55 Direct materials purchases in sets56 Cost per set57 Total cost of wheel sets direct materials purchases5859 Required production units60 Metal parts direct materials pounds per unit produced:61 Total pounds needed for production62 Add: Desired ending direct materials in pounds (ending balance 2021)63 Total materials required64 Less: Beginning direct materials in pounds (ending balance 2020)65 Direct materials purchases66 Cost per pound67 Total cost of metal parts direct materials purchases6869 Required production units70 Canvas direct material yards per unit produced:71 Total yards needed for production72 Add: Desired ending direct materials in yards (ending balance 2021)73 Total materials required74 Less: Beginning direct materials in pounds (ending balance 2020)75 Direct materials purchases76 Cost per yard77 Total cost of canvas direct materials purchases7879 Total cost of ALL direct materials purchases8081Management expects that it will take 50 hours of direct labor to manufacture each bike. Direct labor is billed at $20/hour.828384Surrey Bikes, Inc. 1 Surrey Bikes, Inc. manufactures double bench bikes for resorts and other vacation properties.2 Management is asking that the accountant compute the budget variances for 2021.34 Using the information provided on the BLUE TABS, calculate the following variances.5 Include a description of the variables for each computation.6 In order to receive credit --> show your calculations!!Hint: you will need to add up the changes in each of the components (material usage, material price, labor usage, labor cost)7 before computing the variances.89 Total Materials Variance1012131415 Material Price Variance161718192021 Material Quantity Variance222324252627 Total Labor Variance282930313233 Labor Price Variance343536373839 Labor Quantity Variance40H23 45 67

Variance analysis: The process of evaluating the difference between the actual performance and the…

Answered: Total Materials Variance Material Price…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Surrey Bikes, Inc. manufactures double bench bikes for resorts and other vacation properties.

Management now wants the accountants to complete an analysis to compare the budgeted costs to standard costs for 2021.
During the year 2021, the company completed 680 bikes.

Let's discuss changes from budget and standard that occurred during 2021.
Overall, the company was able to increase several efficiencies.
However, the company also experienced some increased costs.
Use this information to complete the CH24 Budet Variances tab; the green section.


Electrical Parts Direct Materials
The purchase price, net of discounts increase by $2.50 per set.
There was also an increase in freight of by $0.25 per set.

Wheel Sets Direct Materials:
The company was able to secure the same wheel sets from a new supplier at a cost of $37/set.
However, freight cost increased by $0.50 per wheel set.

Metal Parts Direct Materials:
The company was also able to reduce the amount of material used for each bike by 3 pounds.
The acual cost of the metal parts was $0.52 per pound.

Canvas Fabric Direct Materials:
The company was also able to reduce the amount of material used for each bike by one-half a yard.
The acual cost of the canvas fabric was $4.95 per yard.

Direct labor:
Employees were tasked with increasing equipment assembly and decreasing labor hours.
They were successful in 2021 and brought hours down by 5/hours/unit!
The company provided a $1/hour raise! This also lead to an increase of $0.25/hour in payroll taxes.

Manufacturing overhead:
There were no changes in manufacturing overhead, no variance needs to be computed

Using this information, computer the budget variances incurred during 2021.

22 Add: Desired ending finished goods units (ending balance 2021)
23 Total required units
24 Less: Beginning finished goods units (ending balance 2020)
| 25 Required production units
26
27
Management expects to end 2020 with some direct materials. They want to make sure that at the end of 2021, they have enough direct
materials on hand to start production right away in 2022.
|28
Expected
2021 Cost
Ending Balance Ending Balance
2021
Per Unit
29
2020
1 set
1 set
$
$
30 Electrical sets direct materials:
95.00
50
150
31 Wheels direct materials - set of 4
32 Metal parts direct materials:
33 Canvas fabric direct materials:
40.00
25
150
200 pounds
$
0.50
1,000
5,000
200
3 yards
$
10.00
20
34
Surrey Bikes, Inc.
Direct Materials Budget
For the Year Ended December 31, 2021
35
36
37
38
39 Required production units
40 Electrical sets per unit produced:
41 Total needed for production
42 Add: Desired ending direct materials (ending balance 2021)
43 Total materials required
44 Less: Beginning direct materials (ending balance 2020)
45 Direct materials purchases
46 Cost per set
47 Total cost of electrical sets direct materials purchases
48
49 Required production units
50 Wheel sets per unit produced: material sets per unit produced:
51 Total wheel sets needed for production
52 Add: Desired ending direct materials (ending balance 2021)
53 Total materials required
54 Less: Beginning direct materials (ending balance 2020)
55 Direct materials purchases in sets
56 Cost per set
57 Total cost of wheel sets direct materials purchases
58
59 Required production units
60 Metal parts direct materials pounds per unit produced:
61 Total pounds needed for production
62 Add: Desired ending direct materials in pounds (ending balance 2021)
63 Total materials required
64 Less: Beginning direct materials in pounds (ending balance 2020)
65 Direct materials purchases
66 Cost per pound
67 Total cost of metal parts direct materials purchases
68
69 Required production units
70 Canvas direct material yards per unit produced:
71 Total yards needed for production
72 Add: Desired ending direct materials in yards (ending balance 2021)
73 Total materials required
74 Less: Beginning direct materials in pounds (ending balance 2020)
75 Direct materials purchases
76 Cost per yard
77 Total cost of canvas direct materials purchases
78
79 Total cost of ALL direct materials purchases
80
81
Management expects that it will take 50 hours of direct labor to manufacture each bike. Direct labor is billed at $20/hour.
82
83
84
Surrey Bikes, Inc.

1 Surrey Bikes, Inc. manufactures double bench bikes for resorts and other vacation properties.
2 Management is asking that the accountant compute the budget variances for 2021.
3
4 Using the information provided on the BLUE TABS, calculate the following variances.
5 Include a description of the variables for each computation.
6 In order to receive credit --> show your calculations!!
Hint: you will need to add up the changes in each of the components (material usage, material price, labor usage, labor cost)
7 before computing the variances.
8
9 Total Materials Variance
10
12
13
14
15 Material Price Variance
16
17
18
19
20
21 Material Quantity Variance
22
23
24
25
26
27 Total Labor Variance
28
29
30
31
32
33 Labor Price Variance
34
35
36
37
38
39 Labor Quantity Variance
40
H23 45 67

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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