warwick bottle company wbc manufactures plastic two liter bott 373145

Warwick Bottle Company (WBC) manufactures plastic two liter bottles for the beverage industry. The cost standards per 100 two liter bottles are as follows:

Standard Cost per 100

Cost Category Two Liter Bottles

Direct labor ……………………… $1.32

Direct materials ………………..….. 5.34

Factory overhead …………………. 0.34

Total ……………………………… $7.00

At the beginning of July, WBC management planned to produce 650,000 bottles. The actual number of bottles produced for July was 700,000 bottles. The actual costs for July of the current year were as follows:

Actual Cost for the

Cost Category Month Ended July 31, 2010

Direct labor ………………….. $ 9,400

Direct materials ……………… 36,500

Factory overhead ……………… 2,400

Total ……………………….. $48,300

a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July.

c. Interpret the budget performance report.