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(Solved by Expert Tutors) Exercise 7-16 (Algorithmic)Cost control evaluation

HardHead


Cost control evaluation

HardHead makes precast concrete steps for use with

manufactured housing. The company had the following 2013 budget based on expected production of 6,200 units:

Standard Cost Amount Budgeted
Direct material $22.50 $139,500
Direct labor 11.40 70,680
Variable overhead
? ??Indirect material 3.75 23,250
? ? ?Indirect labor 1.75 10,850
? ? ?Utilities 1.00 6,200
Fixed overhead
? ? ?Supervisory salaries 78,740
? ? ?Depreciation 30,070
? ? ?Insurance 19,530
Total $378,820

Cost per unit = $378,820 ? 6,200 = $61.10

Actual production for 2013 was 6,900 units, and actual costs for the year were as follows:

Direct material used $161,391
Direct labor 79,143
Variable overhead
? ??Indirect material 24,564
? ? ?Indirect labor 13,041
? ? ?Utilities 7,590
Fixed overhead
? ? ?Supervisory salaries 80,603
? ? ?Depreciation 30,070
? ? ?Insurance 18,012
Total $414,414

Cost per unit = $414,414 ? 6,900 = $60.06

The plant manager, Tanzi Palate, whose annual bonus includes (among other factors) 20 percent of the net favorable cost variances, states that he saved the company $7,176 [($61.10 - $60.06) X 6,900]. He has instructed the plant cost accountant to prepare a detailed report to be sent to corporate headquarters comparing each component's actual per-unit cost with the per-unit amounts in the preceding annual budget to prove the $7,176 cost savings.


a. ?Is the actual-to-budget comparison proposed by Palate appropriate?

- Select your answer -AppropriateInappropriateCorrect 1 of Item 1



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If his comparison is not appropriate, prepare a more appropriate comparison. In the Variance column, enter a "U" for an unfavorable variance or an "F" for a favorable variance and if no variance use "NA". If an amount is zero, enter "0".



?HardHead Concrete?
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?Actual?
?Budget?
?Variance?
? ?
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?Variable OH?

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(blank)

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(blank)

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?Fixed OH?

(blank)

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(blank)

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(blank)

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?Totals?
$??
$??
$??
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?

 


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Apr 19, 2020

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