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ABC Company's production budget for April included the following for raw materials: Budgeted production = 35,000 units; Budgeted raw materials unit cost = $16 per unit. ABC Company's actual production for April was the following: Actual production = 36,000 units; Actual raw materials cost = $16.20 per unit.Calculate the following items for ABC's April performance report for raw materials:Original budget = $.Flexed budget = $.Actual cost = $.Variance = $.Use F or U to identify the variance as Favorable or Unfavorable.

Question

ABC Company's production budget for April included the following for raw materials: Budgeted production = 35,000 units; Budgeted raw materials unit cost = 16perunit.ABCCompany′sactualproductionforAprilwasthefollowing:Actualproduction=36,000units;Actualrawmaterialscost=16 per unit. ABC Company's actual production for April was the following: Actual production = 36,000 units; Actual raw materials cost = 16.20 per unit.Calculate the following items for ABC's April performance report for raw materials:Original budget = .Flexedbudget=.Flexed budget = .Actual cost = .Variance=.Variance = .Use F or U to identify the variance as Favorable or Unfavorable.

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Solution 1

To calculate the values for ABC's April performance report for raw materials, follow these steps:

  1. Original Budget: This is calculated by multiplying the budgeted production units by the budgeted raw materials unit cost. So, 35,000 units * 16/unit=16/unit = 560,000.

  2. Flexed Budget: This is calculated by multiplying the actual production units by the budgeted raw materials unit cost. So, 36,000 units * 16/unit=16/unit = 576,000.

  3. Actual Cost: This is calculated by multiplying the actual production units by the actual raw materials unit cost. So, 36,000 units * 16.20/unit=16.20/unit = 583,200.

  4. Variance: This is calculated by subtracting the flexed budget from the actual cost. So, 583,200−583,200 - 576,000 = $7,200.

  5. Variance Identification: If the actual cost is greater than the flexed budget, the variance is unfavorable (U). If the actual cost is less than the flexed budget, the variance is favorable (F). In this case, because the actual cost (583,200)isgreaterthantheflexedbudget(583,200) is greater than the flexed budget (576,000), the variance is Unfavorable (U).

So, the answers are:

Original budget = 560,000.Flexedbudget=560,000. Flexed budget = 576,000. Actual cost = 583,200.Variance=583,200. Variance = 7,200 U.

This problem has been solved

Solution 2

To calculate the values for ABC's April performance report for raw materials, follow these steps:

  1. Original Budget: This is calculated by multiplying the budgeted production units by the budgeted raw materials unit cost. So, 35,000 units * 16/unit=16/unit = 560,000.

  2. Flexed Budget: This is calculated by multiplying the actual production units by the budgeted raw materials unit cost. So, 36,000 units * 16/unit=16/unit = 576,000.

  3. Actual Cost: This is calculated by multiplying the actual production units by the actual raw materials unit cost. So, 36,000 units * 16.20/unit=16.20/unit = 583,200.

  4. Variance: This is calculated by subtracting the flexed budget from the actual cost. So, 583,200−583,200 - 576,000 = $7,200.

  5. Variance Identification: Since the actual cost is higher than the flexed budget, the variance is unfavorable. So, the variance is U.

So, the answers are:

Original budget = 560,000.Flexedbudget=560,000. Flexed budget = 576,000. Actual cost = 583,200.Variance=583,200. Variance = 7,200 U.

This problem has been solved

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