2023 Relaxing Recliners manufactures leather recliners and uses flexible budgeting and a standard cost | Assignments Online

Relaxing Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system.

 

P23-31B Relaxing Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Relaxing allocates overhead based on yards of direct materials.

 

The company’s performance report includes the following selected data:

	Static Budget (975 recliners)	Actual Results (955 recliners)
Sales (975 recliners _ $505)	$ 492,375
(955 recliners _ $485)		$ 463,175
Variable manufacturing costs:
Direct materials (5,850 yds @ $8.90/yard)	52,065
(6,000 yds @ $8.70/yard)		52,200
Direct labor (9,750 hrs @ $9.00/hour)	87,750
(9,350 hrs @ $9.10/hour)		85,085
Variable overhead (5,850 yds @ $5.30/yard)	31,005
(6,000 yds @ $6.70/yard)		40,200
Fixed manufacturing costs:
Fixed overhead	60,255	62,255
Total cost of goods sold	$ 231,075	$ 239,740
Gross profit	$ 261,300	$ 223,435

 

Requirements

1. Prepare a flexible budget based on the actual number of recliners sold.

2. Compute the price variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead spending, variable overhead efficiency, fixed overhead spending, and fixed overhead volume variances.

3. Have Relaxing’s managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?

 

4. Describe how Relaxing’s managers can benefit from the standard costing system