(Total variable overhead variance)
Quick Study 21-20 (15 minutes)
Sales Actual Flexible Budget Fixed Budget
Units 50 50 45
Price per
unit
$9,000 $9,500 $9,500
Quick Study 21-21 (15 minutes)
Sales Actual Flexible Budget Fixed Budget
Units 216,944 216,944 225,944
Price per
unit
$30,200 $30,000 $30,000
EXERCISES
Exercise 21-1 (20 minutes)
Item Cost
a. Bike frames Variable
b. Screws for assembly Variable
c. Repair expense for tools (If these costs are only remotely related
Variable
g. Incoming shipping expenses* Variable
h. Taxes on property Fixed
i. Office supplies (This item can be a variable cost, but it usually is
not because it doesn’t often change in direct proportion to changes in
the volume level)
Fixed
* Incoming shipping expenses are variable with respect to the number (volume) of
incoming shipments, not production.
** Gas used for heating is often a mixed cost rather than strictly variable.
Financial and Managerial Accounting, 6th Edition
Exercise 21-2 (30 minutes)
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2015
Flexible Budget Flexible Flexible Flexible
Variable
Amount
per Unit*
Total
Fixed
Cost
Budget for
Unit Sales
of 6,000
Budget for
Unit Sales
of 7,000
Budget for
Unit Sales
of 8,000
Sales……………….…………….
$400.00 $2,400,000 $2,800,000 $3,200,000
Variable costs
Direct materials….……...... 40.00 240,000 280,000 320,000
Total variable costs……….
177.00 1,062,000 1,239,000 1,416,000
Contribution margin….......
$223.00 1,338,000 1,561,000 1,784,000
Fixed costs
Plant manager salary....... $ 65,000 65,000 65,000 65,000
Office rent……………………. 36,000 36,000 36,000 36,000
Total fixed costs…………... $366,000 366,000 366,000 366,000
Income from operations…..... $ 972,000 $1,195,000 $1,418,000
* Equals total variable costs divided by the volume of 7,000 units.
Exercise 21-3 (25 minutes)
SOLITAIRE COMPANY
Flexible Budget Performance Report
For Month Ended June 30
Flexible Actual
Budget Results Variances
Sales (10,800 units)…………..…….….. $540,000 $540,000 $ 0
Variable expenses……..….…….……... 378,000 351,000 27,000 F
Supporting computations
Total fixed budget sales……….……..……..………….………..……$ 420,000
Total fixed budget units……………..……..…………..……..……….÷ 8,400
Budgeted variable expenses…………..………………………..…..$35 per unit
Flexible budget units……..……..……..…….…….…………………..× 10,800
Flexible budget variable expenses…….…….…….…..…………$ 378,000
Total actual expenses……….……..……..…………..………………..$ 378,000
Financial and Managerial Accounting, 6th Edition
Exercise 21-4 (25 minutes)
BAY CITY COMPANY
Flexible Budget Performance Report
For Month Ended July 31
Flexible Actual
Budget Results Variances
Sales (7,200 units)…………….…….….. $720,000 $737,000 $17,000 F
Variable expenses……..….…….……... 468,000 483,000 15,000 U
Supporting computations
Total fixed budget sales……….……..……..………………..$ 750,000
Total units budgeted……….……..…………………..…..…..÷ 7,500
Total fixed budget variable expenses……………........$ 487,500
Total units budgeted……….……..…………………..…..…..÷ 7,500
Budgeted variable expenses…………..……..…….………$ 65 per unit
Flexible budget units……..……..……….……..…..………..× 7,200
Flexible budget variable expenses…….……..………….$ 468,000
forwarded, distributed, or posted on a website, in whole or part.
Exercise 21-5 (10 minutes)
Exercise 21-6 (5 minutes)
Following management by exception, the company should focus on those
variances that exhibit the greatest differences from the standard. This would
Exercise 21-7 (15 minutes)
Exercise 21-8 (10 minutes)
(1) The standard cost for one unit is computed as:
Direct materials (6 lbs. @$8 per lb.)………..……..….…….…….…….…. $ 48
Financial and Managerial Accounting, 6th Edition
Exercise 21-8 (continued)
(2) Total cost variance
Actual costs incurred during the month:
Direct materials (48,500 x $8.10)……………..………………………………..…….…$392,850
Total actual manufacturing costs……………….……………………….…….……...$849,900
Standard overhead costs to produce actual activity:
Direct materials (8,000 x 6 lbs. x $8 per lb.)…………….…………………..……..$384,000
Total actual manufacturing costs ……………………………………….…….……...
Total standard manufacturing costs……………..………….…….…….…….…….
$849,900
832,000
Total cost variance (unfavorable) ……………..…………………….….…….……...$ 17,900
Exercise 21-9 (15 minutes)
Direct materials price variance:
Direct materials quantity variance:
Actual quantity used x Standard price (48,500 x $8.00)…..….…….…….….$388,000
*8,000 units x 6 pounds per unit = 48,000 pounds
forwarded, distributed, or posted on a website, in whole or part.
Exercise 21-10 (15 minutes)
Direct labor rate variance:
Actual hours x Actual rate per hour (15,700 x $16.50)……………………..….$259,050
Actual hours x Standard rate per hour (15,700 x $16.00)………….…….….. 251,200
Direct labor rate variance (unfavorable)……………….……..…….…….…….….$ 7,850
Direct labor efficiency variance:
Actual hours x Standard rate per hour (15,700 x $16.00)………….…….…..$251,200
Exercise 21-11 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (138,000 x $3.75)……………..…….…..$517,500
Actual quantity used x Standard price (138,000 x $4.00)…..…….…….……$552,000
Financial and Managerial Accounting, 6th Edition
Exercise 21-11 (continued)
Part 2 Direct labor rate variance:
Actual hours x Actual rate per hour (31,000 x $15.10)……………………..….$468,100
Direct labor efficiency variance:
Actual hours x Standard rate per hour (31,000 x $15.00)………….…….…..$465,000
Exercise 21-12 (25 minutes)
Part 1 Direct materials price variance:
Actual cost of direct materials used (92,000 x $2.95)…………………….……$271,400
Direct materials quantity variance:
Actual quantity used x Standard price (92,000 x $3.00)…..….…….…….….$276,000
*9,000 units x 10 pounds per unit = 90,000 pounds
Part 2 Direct labor rate variance:
Actual hours x Actual rate per hour (37,600 x $6.05)……………………….….$227,480
Actual hours x Standard rate per hour (37,600 x $6.00)………………….….. 225,600
Direct labor rate variance (unfavorable)……………….……..…….…….…….….$ 1,880
Direct labor efficiency variance:
**9,000 units x 4 hours per unit = 36,000 hours