Question

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost...

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

Cost Category Standard Cost
per 100 Two-Liter
Bottles
Direct labor $1.36
Direct materials 5.72
Factory overhead 0.42
Total $7.5

At the beginning of July, GBC management planned to produce 460,000 bottles. The actual number of bottles produced for July was 496,800 bottles. The actual costs for July of the current year were as follows:

Cost Category Actual Cost for the
Month Ended July 31
Direct labor $6,621
Direct materials 27,735
Factory overhead 2,107
Total $36,463

Enter all amounts as positive numbers.

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

Genie in a Bottle Company
Manufacturing Cost Budget
For the Month Ended July 31
Standard Cost at Planned Volume(460,000 Bottles)
Manufacturing costs:
Direct labor $
Direct materials
Factory overhead
Total $

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If required, round your answers to nearest cent.

Genie in a Bottle Company
Manufacturing Costs-Budget Performance Report
For the Month Ended July 31
Actual
Costs
Standard Cost at Actual Volume(496,800 Bottles) Cost Variance-
(Favorable)
Unfavorable
Manufacturing costs:
Direct labor $ $ $
Direct materials
Factory overhead
Total manufacturing cost $ $ $

c. The Company's actual costs were $797   than budgeted.   direct labor and direct material cost variances more than offset a small   factory overhead cost variance.

Homework Answers

Answer #1
A
Standard cost at planned
volume (460,000 Bottles)
Direct labor 6256 =4600*1.36
Direct materials 26312 =4600*5.72
Factory overhead 1932 =4600*0.42
Total 34500
B
Actual Costs Standard cost at actual
volume (496,800 Bottles)
Cost-Variance
Direct labor 6621 6756.48 -135.48
Direct materials 27735 28416.96 -681.96
Factory overhead 2107 2086.56 20.44
Total 36463 37260 -797
C
The company's actual costs were $797 less than budgeted. Favorable direct labor and direct material cost variances more than offset a small unfavorable factory overhead cost variance.
Workings:
Standard cost at actual
volume (496,800 Bottles)
Direct labor 6756.48 =4968*1.36
Direct materials 28416.96 =4968*5.72
Factory overhead 2086.56 =4968*0.42
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