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)?
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