Reference no: EM132526013

Problem 1 - Smith Company which uses the high-low method to analyze cost behavior, has determined that machine hours best predict the company's total utilities cost. The company's cost and machine hour usage data for the six months of the year follow:

Requirements - Using the high-low method, answer the following questions:

1. What is the variable utilities cost per machine hour?

2. What is the fixed cost of utilities each month?

3. If Smith Company uses 1,210 machine hours in a month, what will its total costs be?

Problem 2 - Flexible Budget Preparation

The master budget at Calderon, Inc, last period called for sales of 90,000 sales at $ 15 each. The costs were estimated to be $6 variable per unit and $320,000 fixed. During the period, actual production and actual sales were 93,000 units. The selling price was $15.20 per unit. Variable costs were $ 6.30 per unit. Actual fixed costs were $320,000.

Required - Prepare a flexible budget for Calderon, Inc.

Problem 3 - Calculate direct materials and direct labor variances

The Santaro Restaurant Group manufactures the bags of frozen French fries used at its franchised restaurants. Last week, Santaro's purchased and used 105,000 pounds of potatoes at a price of $1.02 per pound. During the week, 1,800 direct labor hours were incurred in the plant at a rate of $15.50 per hour. The standard price per pound of potatoes is $1.08 per pound, and the standard direct labor rate is $14.75 per hour. Standards indicate that for the number of bags of frozen fries produced, the factory should have used 101,000 pounds of potatoes and 1,670 hours of direct labor.

Required -

1. Determine the direct materials price and quantity variances. Be sure to label each variance as unfavorable or favorable.

2. Determine the direct labor rate and efficiency variances. Be sure to label each variance as favorable or unfavorable.

3. Think of a plausible explanation for the variances found in Requirement 1 and 2.