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**Flexible Budgets and Standard Cost Systems**

Chapter 23 Exercises

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**Flexible Budgets In-Class Exercises: Exercise No. Page**

E Flexible Budget (Use the format, as reflected on the next slide, to complete the exercise)

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Flexible Budget Exercise Page E Flexible Budget

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**Flexible Budget (1) Selling price of each pad…..$12.00**

OfficePlus sells its main product, ergonomic mouse pads and provides the following information: (1) Selling price of each pad…..$12.00 (2) Variable cost per pat………..$ 5.20 (3) Fixed costs up to 65,000 pads……$205,000 (4) Fixed costs above 65,000 pads…..$280,000 Prepare a monthly flexible budget for the product, showing sales revenue, variable costs, fixed costs, and income for volume levels of 45,000, 55,000, and 75,000 pads.

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**Compute the Sales Revenue: 45,000 x $12 = $540,000**

Flexible Budget Compute the Sales Revenue: 45,000 x $12 = $540,000

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Flexible Budget

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Flexible Budget

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Flexible Budget

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**First two volume levels have the same fixed costs.**

Flexible Budget First two volume levels have the same fixed costs.

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**Fixed costs increase at the 75,000 volume level.**

Flexible Budget Fixed costs increase at the 75,000 volume level.

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Flexible Budget

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Flexible Budget End of Exercise

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**Material & Labor Variances**

In-Class Exercises: Exercise No Page E Material & Labor Variances

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**Material & Labor Variances**

Exercise E23-19: Great Fender uses a standard cost accounting system and manufactures boat fenders. The following data is presented for 2014. (1) Manufactured 20,000 boat fenders. (2) Used 144,000 square feet of extruded vinyl, purchased at $1.05 per square foot. (3) Production required 420 direct labor hours at $13.50 per hour. (4) The direct materials standard was 7 sq. ft. of vinyl per fender, at a standard cost of $1.10 per sq. ft. (5) The labor standard was direct labor hour per fender, at a standard cost of $12.50 per hour. Use this information to compute the cost and efficiency variances for direct materials and direct labor.

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**Material & Labor Variances Direct Material Variances**

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**Direct Material Variances**

Preliminary data/computations: Actual quantity…………144,000 sq ft (given) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft Actual price…………….. $1.05/sq ft (given) Standard price…………. $1.10/sq ft (given)

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**Direct Material Variances**

Preliminary data/computations: Actual quantity…………144,000 sq ft (given) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft Actual price…………….. $1.05/sq ft (given) Standard price…………. $1.10/sq ft (given) This item requires a computation based on the data presented. (20,000 units produced requiring 7 sq ft each)

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**Direct Material Variances**

Preliminary data/computations: Actual quantity…………144,000 sq ft (given) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft Actual price…………….. $1.05/sq ft (given) Standard price…………. $1.10/sq ft (given)

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**Direct Material Variances**

Preliminary data/computations: Actual quantity…………144,000 sq ft (given) Standard quantity…….. 20,000units x 7 sq ft/unit = 140,000 sq ft Actual price…………….. $1.05/sq ft (given) Standard price…………. $1.10/sq ft (given)

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**Direct Material Variances**

General Model Method

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**Direct Material Variances**

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**Direct Material Variances**

Formula Method

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**Direct Material Variances**

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**Material & Labor Variances Direct Labor Variances**

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**Material & Labor Variances**

Exercise E23-19: Great Fender uses a standard cost accounting system and manufactures boat fenders. The following data is presented for 2014. (1) Manufactured 20,000 boat fenders. (2) Used 144,000 square feet of extruded vinyl, purchased at $1.05 per square foot. (3) Production required 420 direct labor hours at $13.50 per hour. (4) The direct materials standard was 7 sq. ft. of vinyl per fender, at a standard cost of $1.10 per sq. ft. (5) The labor standard was direct labor hour per fender, at a standard cost of $12.50 per hour. Use this information to compute the cost and efficiency variances for direct materials and direct labor.

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**Direct Labor Variances**

Preliminary data/computations: Actual quantity……… 420 hours (given) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours Actual price…………. $13.50/hour (given) Standard price……… $12.50/hour (given)

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**Direct Labor Variances**

Preliminary data/computations: Actual quantity……… 420 hours (given) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours Actual price…………. $13.50/hour (given) Standard price……… $12.50/hour (given) This item requires a computation based on the data presented. (20,000 units produced using .025 hours each)

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**Direct Labor Variances**

Preliminary data/computations: Actual quantity……… 420 hours (given) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours Actual price…………. $13.50/hour (given) Standard price……… $12.50/hour (given)

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**Direct Labor Variances**

Preliminary data/computations: Actual quantity……… 420 hours (given) Standard quantity….. 20,000 units x .025 hours/unit = 500 hours Actual price…………. $13.50/hour (given) Standard price……… $12.50/hour (given)

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**Direct Labor Variances**

General Model Method

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**Direct Labor Variances**

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**Direct Labor Variances**

Formula Method

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**Direct Labor Variances**

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**Direct Labor Variances**

End of Exercise

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