Pottasnevitch Company sells office products and for the most part has a regular group of customers and fairly predictable sales.
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Question 1. The Von
Pottasnevitch Company sells office products and for the most part has a regular group of customers and fairly predictable sales. Many of the company’s customers are offered credit, while other clients do business on a cash basis. The company’s monthly sales are consistently split between 10% cash business and 90% on credit. The credit sales are collected 50% in the same month of the sale and the remaining 50% is due the following month. Sales for the upcoming first quarter of the next year are estimated as follows:
January: $100,000
February: $200,000
March: $150,000
Calculate the expected cash collections for February.
Question 2. The Walkabout Corporation manufactures boomerangs (its only product). The company’s standards for manufacturing boomerangs are as follows:
| Standard direct labor rate per hour | $ 18.50 per hour |
| Standard direct labor hours per boomerang | 0.4 hours |
During the month of January, the company produced 1,800 boomerangs. Actual production data for the month follows:
| Actual direct labor hours worked | 700 hours |
| Actual direct labor cost incurred | $ 14,000 |
Part A. Calculate the labor rate variance for the month. Is it favorable or unfavorable?
Part B. Calculate the labor efficiency variance for the month. Is it favorable or unfavorable?
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