Accounting 25th Edition by Carl Warren, James Reeve, Jonathan Duchac

Exercise 3

Budget performance report
Time in a Bottle Company (TBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

At the beginning of May, TBC management planned to produce 600,000 bottles. The actual number of bottles produced for May was 610,000 bottles. The actual costs for May of the current year were as follows:

a. Prepare the May manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for TBC, assuming planned production.
b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for May.
c. Interpret the budget performance report.