Bayou Barbecue Inc. bottles and sells barbecue sauce. In the current year, the company had expected to sell 500,000 bottles but actually bottled and sold 600,000 bottles. The standard direct materials cost for each bottle is $.36 comprised of 12 ounces of material at a cost of $.03 per ounce. During the year, 7,800,000 ounces of material was purchased out of which 7,350,000 ounces were used at a cost of $.035 per ounce.
Required: Compute each of the following variances. Indicate whether the variance is favorable (F) or unfavorable (U).
Definitions:
Capitalized
The process of recording an expenditure as an asset on the balance sheet, rather than as an expense on the income statement, allowing for depreciation over time.
Amortized
The process of gradually reducing a debt through regular payments over a period.
Financial Statements
A set of formal records that quantitatively describe the financial activities and position of a business, person, or other entity.
Affiliated Organizations
Entities that are directly or indirectly controlled by, or under common control with, another entity.
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