Vermont’s Best Maple Syrup Inc. is a small business selling a single product, pure Vermont maple syrup, since 1939. Thei
Posted: Thu Apr 28, 2022 11:05 am
Vermont’s Best Maple Syrup Inc. is a small business
selling a single product, pure Vermont maple syrup, since 1939.
Their best-seller is the one-pint jug. The company’s relevant range
of production is between 600,000 and 800,000 jugs a year. Within
the relevant range, variable costs per jug and total annual fixed
costs remain constant. The company has the following data from its
standard cost system.
Standard Costs
Variable costs per jug:
Direct materials (5 gallons at $1.20 per gallon
of maple tree sap)
$6.00
Direct labor (0.04 direct labor hour at $16 per
hour)
$0.64
Variable mfg. overhead (0.04 direct labor hour at
$21 per hour)
$0.84
Selling and administrative expenses
$2.00
Fixed costs per year:
Mfg. overhead
$921,600
Selling and administrative expenses
$650,000
The planning budget income statement is based on the
expectation of selling 640,000 jugs of maple syrup. The budgeted
selling price is $15 per jug.
For planning and control purposes, the company relies on
its standard costs to derive their budgeted costs per jug of maple
syrup. For example, the cost of direct materials reported on the
planning budget income statement is calculated as $6.00 per jug
time 640,000 jugs, which is $3,840,000. Also, the denominator level
of activity is calculated as 0.04 direct labor hour per jug times
640,000 jugs, which is 25,600 direct labor
hours.
The company actually produced and sold 680,000 jugs at
$15.25 per jug this year. The company does not have a
beginning or ending raw materials inventory, because it uses all
raw materials purchased. Also, the company does not have a
beginning or ending finished goods inventory. Everything
produced in the year is sold in that same year.
The actual income statement for the year is provided
below.
Vermont’s Best Maple Syrup Inc.
Actual Income Statement
Sales (680,000 jugs produced and sold at $15.25 per
jug)
$10,370,000
Less Variable Costs:
Direct materials (3,128,000 gallons at $1.30 per
gallon)
4,066,400
Direct labor (36,000 direct labor hours at $16
per hour)
561,000
Variable manufacturing overhead
697,000
Variable selling and administrative
costs
1,224,000
Contribution margin
3,821,600
Less Fixed Costs:
Fixed manufacturing overhead
costs
998,000
Fixed selling and administrative
costs
750,000
Net operating income
$2,073,600
Calculate the material price variance and quantity
variance;
the labor rate variance and efficiency
variance;
the variable overhead rate variance and efficiency
variance;
and the fixed manufacturing overhead budget variance and
volume variance).
Show your calculations
selling a single product, pure Vermont maple syrup, since 1939.
Their best-seller is the one-pint jug. The company’s relevant range
of production is between 600,000 and 800,000 jugs a year. Within
the relevant range, variable costs per jug and total annual fixed
costs remain constant. The company has the following data from its
standard cost system.
Standard Costs
Variable costs per jug:
Direct materials (5 gallons at $1.20 per gallon
of maple tree sap)
$6.00
Direct labor (0.04 direct labor hour at $16 per
hour)
$0.64
Variable mfg. overhead (0.04 direct labor hour at
$21 per hour)
$0.84
Selling and administrative expenses
$2.00
Fixed costs per year:
Mfg. overhead
$921,600
Selling and administrative expenses
$650,000
The planning budget income statement is based on the
expectation of selling 640,000 jugs of maple syrup. The budgeted
selling price is $15 per jug.
For planning and control purposes, the company relies on
its standard costs to derive their budgeted costs per jug of maple
syrup. For example, the cost of direct materials reported on the
planning budget income statement is calculated as $6.00 per jug
time 640,000 jugs, which is $3,840,000. Also, the denominator level
of activity is calculated as 0.04 direct labor hour per jug times
640,000 jugs, which is 25,600 direct labor
hours.
The company actually produced and sold 680,000 jugs at
$15.25 per jug this year. The company does not have a
beginning or ending raw materials inventory, because it uses all
raw materials purchased. Also, the company does not have a
beginning or ending finished goods inventory. Everything
produced in the year is sold in that same year.
The actual income statement for the year is provided
below.
Vermont’s Best Maple Syrup Inc.
Actual Income Statement
Sales (680,000 jugs produced and sold at $15.25 per
jug)
$10,370,000
Less Variable Costs:
Direct materials (3,128,000 gallons at $1.30 per
gallon)
4,066,400
Direct labor (36,000 direct labor hours at $16
per hour)
561,000
Variable manufacturing overhead
697,000
Variable selling and administrative
costs
1,224,000
Contribution margin
3,821,600
Less Fixed Costs:
Fixed manufacturing overhead
costs
998,000
Fixed selling and administrative
costs
750,000
Net operating income
$2,073,600
Calculate the material price variance and quantity
variance;
the labor rate variance and efficiency
variance;
the variable overhead rate variance and efficiency
variance;
and the fixed manufacturing overhead budget variance and
volume variance).
Show your calculations