Required information
Use the following information for the Problems below.
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Stanley manufactures and sells insulated cups and mugs. The static budget was prepared before an unexpected, viral marketing campaign driven by spontaneous endorsements by online influencers. As a result of this campaign, sales, and therefore production sky-rocketed. Importantly, during the year, purchasing managers renegotiated some materials costs during the year, HR renegotiated a higher wage for workers who were now working in higher pressure conditions, and the organization leased new facilities for production and inventory.
Standard
Units produced and sold 1,000,000
Sales price $ 30.00
Direct materials required
• Metal barrel (interior) (1) $ 3.00
• External coating (1) $ 2.00
• Plastic cap (1) $ 0.50
• Straw (1) $ 0.05
Total direct materials required per unit $ 5.55
Direct labor hours 10,000
Direct labor rate per hour $ 9.50
Variable manufacturing overhead per DL hour $ 1.50
Fixed costs $ 75,000
Actual
Units produced and sold 20,000,000
Sales price $ 35.00
Direct materials purchased (total)
• Metal barrel (interior) (1) $ 2.00
• External coating (1) $ 1.00
• Plastic cap (1) $ 0.45
• Straw (1) $ 0.05
Total direct materials required per unit $ 3.50
Direct labor hours 200,000
Direct labor rate per hour $ 10.50
Variable manufacturing overhead per DL hour $ 0.08
Fixed costs $ 120,000
PR 10-15 (LO 10.5) Required a. Prepare a static budget to actual comparison.
Required:
a. Prepare a static budget to actual comparison.
Note: Select None if there is no variance.
Actual Results
Units Produced 20,000,000
Units Sold 70,000,000
Revenue $ 70,000,000
Variable costs
Direct material $ 5,550,000
Direct labor $ 2,100,000
Variable manufacturing overhead
Total variable costs $ 7,650,000
Contribution margin $ 62,350,000
Fixed costs
Total fixed costs
Operating income $ 62,350,000
Static Budget
Units Produced
Units Sold
Revenue
Variable costs
Direct material
Direct labor
Variable manufacturing overhead
Total variable costs
Contribution margin
Fixed costs
Total fixed costs
Operating income
Static Budget Variance
Units Produced
Units Sold
Revenue
Variable costs
Direct material
Direct labor
Variable manufacturing overhead
Total variable costs
Contribution margin
Fixed costs
Total fixed costs
Operating income