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148. The following information comes from the records of Dina Co. for the current period.
a. Compute the overhead controllable and volume variances. In each case, state whether the
variance is favorable or unfavorable.
b. Prepare the journal entries to charge overhead costs to goods in process and the overhead
variances to their proper accounts.
Actual costs and quantities:
Direct materials used ………………………… 38,000 feet @ $6.20 per foot
Direct labor hours used ……………………… 50,660 hours
Direct labor rate per hour ……………………. $16
Factory overhead ……………………………. $211,600
25,000 units were produced during the period.
Standard costs and quantities per unit:
Direct materials ………………………………. 1.5 ft. @ $6.10 per ft.
Direct labor …………………………………… 2 hours @ $17 per hour
Factory overhead (based on budgeted production of 24,500 units)
Variable overhead $2.25/direct labor hour
Fixed overhead $1.95/direct labor hour
149. If Falcon Company’s actual overhead incurred during a period was $32,700 and the
company reported a favorable overhead controllable variance of $1,200 and an unfavorable
overhead volume variance of $900, how much standard overhead cost was assigned to the
products produced during the period?
150. A company’s flexible budget for 36,000 units of production showed variable overhead
costs of $54,000 and fixed overhead costs of $50,000. The company actually incurred total
overhead costs of $95,300 while operating at a volume of 32,000 units. What is the
controllable variance?
151. During November, Heim Company allocated overhead to products at the rate of $26.00
per direct labor hour. This figure was based on 80% of capacity or 1,600 direct labor hours.
However, Heim Company operated at only 70% of capacity, or 1,400 direct labor hours.
Budgeted overhead at 70% of capacity is $38,900, and overhead actually incurred was
$38,000. What is the company’s volume variance for November? (Indicate whether the
variance is favorable or unfavorable)
152. Selected information from Michaels Company’s flexible budget is presented below:
Operating Levels
80% 90% 100%
Budgeted production in units 4,800 5,400 6,000
Budgeted labor (standard hours)
Budgeted overhead: 9,600 10,800 12,000
Variable overhead $86,400 $97,200 $108,000
Fixed overhead 63,600 63,600 63,600
Michaels Company applies overhead to production at a rate of $31.25 per unit based on a
normal operating level of 80% of capacity. For the current period, Michaels Company
produced 5,400 units and incurred $62,000 of fixed overhead costs and $96,000 of variable
overhead costs. The company used 11,000 labor hours to produce the 5,400 units. Calculate
the variable overhead spending and efficiency variances, and the fixed overhead spending and
volume variances. Indicate whether each variance is favorable or unfavorable.
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153. Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount
is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire
produced 5,500 units. Budgeted fixed overhead is $66,000, and overhead incurred was
$67,000.
Required: Determine the volume variance for May.
154. Prichard Company has developed the following standard cost data based on 60,000 direct
labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable overhead is
$180,000 at this level of activity.
Per Unit
Direct material (3 lbs. @ $2.00/1b.) ………… $ 6.00
Direct labor (0.5 hrs. @ $8.00/hr. ) …………. 4.00
Variable overhead (0.5 hrs. @ $3.00/hr.) …… 1.50
Fixed overhead (0.5 hrs. @ $6.00/hrs) ……… 3.00
Total standard cost …………………………… $14.50
During the current period, the company operated at 80% of capacity and produced 128,000
units. Actual costs were:
Direct material (380,000 lbs.) ……………. $779,000
Direct labor (63,000 hrs.) …………………. 507,150
Fixed overhead …………….……………… 365,000
Variable overhead ………………………… 220,000
Calculate the variable overhead spending and efficiency variance and the fixed overhead
spending and volume variances. Indicate whether each is favorable or unfavorable.
155. Chips Co. assigned direct labor cost to its products in May for 1,300 standard hours of
direct labor at the standard $8 per hour rate. The direct labor rate variance for the month was
$200 favorable and the direct labor efficiency variance was $150 favorable. Prepare the
journal entry to charge Goods in Process Inventory for the standard labor cost of the goods
manufactured in May and to record the direct labor variances. Assuming that the direct labor
variances are immaterial, prepare the journal entry that Chips would make to close the
variance accounts.
156. Calais Company’s fixed budget for the first quarter of the calendar year appears below.
Prepare flexible budgets that show variable costs per unit, fixed costs and two different
flexible budgets for sales volumes of 22,000 and 24,000.
Sales (20,000 units) $800,000
Cost of goods sold:
Direct materials $160,000
Direct labor 140,000
Variable overhead 100,000
Fixed overhead 120,000
520,000
Gross profit $ 280,000
Selling expenses:
Sales commissions(all variable)
40,000
Advertising (all fixed) 50,000
General and administrative expenses:
Salaries (all fixed) 90,000
Rent (all fixed) 30,000
Depreciation (all fixed) 20,000
230,000
Net income from operations $ 50,000
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157. Gates Company reports the following information regarding the production on one of its
products for the month. Compute the direct materials cost variance, the direct materials price
variance, the direct materials quantity variance and identify each as either favorable or
unfavorable.
Direct materials standard (6 lbs. @ $3/lb.) $18 per finished unit
Actual direct materials used 179,000 lbs.
Actual finished units produced 30,000 units
Actual cost of direct materials used $554,900
158. Gates Company reports the following information regarding the production on one of its
products for the month. Compute the direct labor cost variance, the direct labor rate variance,
the direct labor efficiency variance and identify each as either favorable or unfavorable.
Direct labor standard (2 hrs. @ $15/hr.) $30 per finished unit
Actual direct labor hours 60,800 hrs.
Actual finished units produced 30,000 units
Actual cost of direct labor $905,920
159. Gates Company collected the following data regarding production of one of its products.
Compute the variable overhead cost variance, the variable overhead spending variance, the
variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead
spending variance, and the fixed overhead volume variance.
Direct labor standard (2 hrs. @ $15/hr.) $30.00 per finished unit
Actual direct labor hours 60,800 hrs.
Budgeted units 31,000 units
Actual finished units produced 30,000 units
Standard variable OH rate (2 hrs. @ $14.00/hr.) $28.00 per finished unit
Standard fixed OH rate ($310,000/31,000 units) $10.00 per unit
Actual cost of variable overhead costs incurred $857,600
Actual cost of fixed overhead costs incurred $312,000
Fill in the Blank Questions
160. __________ are preset costs for delivering a product or service under normal conditions.
161. Companies promoting continuous improvement strive to achieve _____________
standards by eliminating inefficiencies and waste.
162. A standard that takes into account the reality that some loss usually occurs with any
process under normal application of the process is known as a _______________ standard.
163. Differences between actual costs and standard costs are known as _______________.
These differences may be subdivided into ______________ and _________________.
164. Direct materials variances are called price and quantity variances. However, when
referring to direct labor, these variances are usually called _________________ and
_____________ variances.
165. In the analysis of variances, management commonly focuses on four categories of
production costs: __________________ cost, ___________________ cost; _____________
cost; and _________________ cost.
166. A management approach that emphasizes significant differences from plans is known as
___________________.
167. A fixed budget is also called a _____________ budget.
168. A favorable variance for a cost means that when compared to the budget, the actual cost
is ____________________ than the budgeted cost.
169. A flexible budget is also called a _______________ budget.
170. A _______________________ contains relevant information that compares actual
results to planned activities.
171. The difference between the actual sales and the flexible budget sales is called the
______________________ variance.
172. The difference between the flexible budget sales and the fixed budget sales is called the
__________________________ variance.
173. In preparing flexible budgets, the costs that remain constant in total are
_______________ costs. Those costs that change in total are _______________ costs.
174. If actual price per unit of materials is greater than the standard price per unit of materials,
the direct materials price variance is _______________________.
175. The difference between the actual overhead cost incurred and the standard overhead
applied is the __________________________.
176. The sum of the variable overhead spending variance, the variable overhead efficiency
variance, the fixed overhead spending variance is the ____________________________.
177. The fixed overhead variance can be broken down into the _________________ variance
and the _________________ variance.
178. At the end of the accounting period, immaterial variances are closed to _____________.