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Flexible Budgets: Standard Costs for Joe's Lawn Service

#1. Flexible Budgets: Joe's Lawn Service primarily mows lawns for residential customers. Management has determined direct labor hours is the primary cost driver and has developed the following cost equations based on direct labor hours:

Grooming Supplies (variable) y= $0 + $4.00x
Direct Labor (variable) y= $0 + $12.00x
Overhead (mixed) y= $8,000 + $1.00x

1. Prepare a flexible budget for each of the following activity levels: 550, 600, and 700 direct labor hours.
2. Determine the total cost per direct labor hour at each of the levels of activity.
3. The company normally records 650 direct labor hours during June. Each job requires 1.45 hours of labor time. If management wants to earn a profit equal to 40% of the costs incurred, what should the charge be to an average lawn-care customer?

#2. Standard Costs

January production numbers:
Production volume 4000 units
Material Cost (actual) $14,500
Actual Hours worked 5,950 DLH
Material Standards .75 sq yds @ $5.00 per yard
Labor Standards 1.5 DLH @ $20 per DLH
Material Quantity Variance $1,000 U
Labor Rate Variance $1,500 F

1. Standard quantity of material allowed for January production.
2. Standard DLH allowed for January production.
3. Material price variance
4. Labor efficiency variance
5. Standard prime cost to produce one unit
6. Actual cost to produce one unit
7. Explain the variances. What could have caused these variances?

Solution Preview

Your tutorial creates a variable budget and an analysis of average job cost to ...

Solution Summary

Your tutorial creates a variable budget and an analysis of average job cost to assist you. For the standard costing problem, your tutorial shows you a "grid" to show you how these variances work so you have a template for other similar problems. Click in cells to see computations. Notice each problem has a separate tab.