Question

1. A supermarket deli will begin roasting chickens. Each chicken is expected to weigh 4 lbs, and the price per pound is expected to be $1.50. The budgeted labor cost per chicken is $1. Fixed overhead is estimated to be $2,000 per month. Packaging costs are budgeted to be $.50 per bird sold. The store expects to sell the birds for $9 each. After the first month of operation, the deli reports the following: 1,200 roasted chickens were sold for $10,200 in total, 5,040 lbs of chicken costing $7,056 were used, and the labor cost was $1100. Fixed overhead costs amounted to $2100, and packaging costs were $550.

1. Please create a flexible budget for 1,200 roasted chickens, showing total variances.
2. Please find the price and quantity variances for DM

Answer 1

a.Flexible Budget

	Standard	Actual	Variance
Sales	10,800	10,200	(600)
Direct Material	7,200	7,056	144
Labor Cost	1,200	1,100	100
Fixed Overheads	2,000	2,100	(100)
Packaging Cost	600	550	50
Profit	$(200)	$(606)	$(406)

b.Direct Material price variance = (Standard Price – Actual Price)*Actual Quantity

= (1.50 – Actual Price)*5,040

= 7,560 – 7,056

= $504 F

Direct Material Quantity Variance = (Standard Quantity – Actual Quantity)*Standard Price

= (1,200*4 – 5,040)*1.5

= 360 U