Question

Problem 1:

A:

We expect sales of $570,000 during 1st quarter. Selling and Administrative quarterly expenses include Sales Commissions (10% of sales), Advertising $2,500, Sales Salaries $30,000, Administrative Salaries $18,000, Depreciation on Office Equipment $5,000.

What will be the TOTAL amount of Selling and Administrative expenses reported on the budgeted income statement for the 1st quarter?

What will be the TOTAL amount of cash payments for selling and administrative expenses reported in the cash budget?

B:

During April, a department completed 1,500 units of product that has a standard materials usage and cost of 2.1 square feet per unit at $0.84 per square foot. The actual material usage consisted of 3,100 square feet at a total cost of $2,604. The actual purchase of this material amounted to 4,000 square feet at a total cost of $3,720.

Calculate (a) the material price variance_______  

and (b) the material quantity variance.________

Answer 1

A) Total Selling & Administrative expenses = sales commission + advertising + sales salaries + administrative salaries + Depreciation of office equipment

sales commission = 10% of $570000 = $57000

Selling and administration expenses = $57000+$2500+$30000+$18000+$5000 = $112500

Total amount of cash payments for selling & administrative expenses = All seling & administration expenses excluding Depreciation on office equipment

= $112500- $5000 = $107500

B) Material Price Variance = (Standard Price - Actual Price) * Actual Quantity

Standard Price = $0.84 , Actual Price = $3720/4000 = $0.93, Actual Quantity = 3100

Material Price Variance = ($0.84-$0.93) * 3100 = -$279 Adverse Variance

Material Quantity Variance = (Standard quantity - Actual quantity) * standard price

Standard quantity = $2.1 * 1500= 3150, Actual quantity = 3100 , Standard price = $0.84

Material quantity variance = (3150-3100) * 0.84 = 42 Favourable variance