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Budgeting is a usuful management tool used for decision making and control

Budgeting is a useful management tool used for decision making and control. Therefore, Quicksand Company has set the following standards for one unit of products:

Direct materials 50 yards x $3 = $150
Direct labor 10 hours x 18= 180
total 330

The following information pertains to September:

Actual complete production: 1,200 units
Direct material purchased: 70,000 yards at $3.25, or $227,500
Direct material used: 62,400 yards
Direct labor: 11,900 hours at $18.30 per hour, or $217,770

Required:

1. Explain who would be in the best position to assist in setting the following standards within an organization and why:

a. direct-material price standard
b. direct-material quantity (efficiency) standard
c. direct-labor rate standard
d. direct-labor efficiency standard

2. Calculate the direct-material price and quantity (efficiency) variances, and the direct-labor rate and efficiency variances. Explain why each variance is favorable or unfavorable.

3. Describe some of the drawbacks of using the operating budget as a control device.

Solution Preview

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Required:

1. Explain who would be in the best position to assist in setting the following standards within an ...

Solution Summary

Management tools used for decisions making and controls are discussed.

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