Homework 8

1. The actual results and static budget are given below for Clark Company.

a) Create a flexible budget for Clark Company

Actual

Flexible Budget

Static Budget

Sales Volume (units)

8,000

9,000

Variable overhead

Cleaning supplies

6,400

7,200

Electricity

3,000

2,700

Maintenance

1,200

1,800

Total variable overhead

Fixed overhead

Supervisor salary

9,000

9,000

Depreciation

6,000

6,000

Rent

7,500

8,000

Total fixed overhead

Total overhead

b) How much of the difference between actual and the static budget is due to cost control and how much is due to activity? Provide numbers and direction.

2. Huron Company produces a commercial cleaning compound called Zoom. The direct material standards for one unit of Zoom are given below:

Standard Quantity Standard Price Standard Cost per Unit

Direct material 4.6 pounds $2.50 per pound $11.50

During the most recent month, the following activity was recorded:

o Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.

o All of the material purchased was used to produce 4,000 units of Zoom.

a) Compute the material cost variances. Indicate whether they are favorable or unfavorable.

3. The following information is provided by the Atlantic Company:

Actual direct material cost

$24,000

Standard direct material cost

$20,000

Direct material usage variance

$3,000 unfavorable

a) What is the direct material price variance (indicate whether it is favorable or unfavorable)?