Exercise 21-13 (30 minutes)
1. Preliminary computations
Actual quantity: 22,000 bd. ft. (given)
Standard quantity: 3,000 units x 8 bd. ft./unit = 24,000 bd. ft.
Actual price: $266,200/22,000 bd. ft. = $12.10/bd. ft.
Standard price: $12.00/bd. ft. (given)
Price and quantity variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
$2,200 U
(Price variance)
$24,000 F
(Quantity variance)
Alternate solution format
Price variance = AQ x (AP – SP)
= 22,000 board feet x ($12.10 – $12.00)
= $2,200 U
Price variance……….....….....$ 2,200 U
Quantity variance…….......... 24,000 F
Total variance......…....…......$21,800 F
2. The unfavorable price variance means the actual price paid is more than
the budgeted price. The favorable quantity variance means the actual
forwarded, distributed, or posted on a website, in whole or part.
Exercise 21-14A (25 minutes)
1.
Work in Process Inventory………………..………………..….….…...288,000
Direct Materials Price Variance*……………………………………….2,200
2.
Direct Materials Quantity Variance………………….….….…….….24,000
Direct Materials Price Variance………………………..……... 2,200
3. The $24,000 materials quantity variance should be investigated because of
Financial and Managerial Accounting, 6th Edition
Exercise 21-15 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (16,000 x $4.05)…………………….…...$ 64,800
Direct materials quantity variance:
Actual quantity used x Standard price (16,000 x $4.00)…..….….….….…...$ 64,000
Part 2
Direct labor rate variance:
Actual hours x Actual rate per hour (5,545 x $19.00***)………………….……$105,355
Direct labor efficiency variance:
Actual hours x Standard rate per hour (5,545 x $20.00)………………….…..$110,900
Standard hours x Standard rate per hour (5,000** x $20.00)……………….. 100,000
Exercise 21-16 (30 minutes)
1.
October variances
Preliminary computations
Actual hours: 16,250 hours (given)
Standard hours: 5,600 units x 3 hrs./unit = 16,800 hrs.
Actual rate: $247,000/16,250 hours = $15.20/hr.
Standard rate: $15.00/hr. (given)
Direct labor cost variances
Rate and efficiency variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
$3,250 U
(Rate variance)
$8,250 F
(Efficiency variance)
$5,000 F
(Total labor variance)
Efficiency variance = (AH – SH) x SR
= (16,250 – 16,800) hours x $15.00 per hour
= (-550 hours) x $15.00 per hour
= $8,250 F
Financial and Managerial Accounting, 6th Edition
Exercise 21-16 (Concluded)
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
Direct labor cost variances
Actual units at actual cost [22,000 hrs. @ $15.25]…………..……..……………………$335,500
Rate and efficiency variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
22,000 x $15.25 22,000 x $15.00 18,000 x $15.00
hours per hour hours per hour hours per hour
2.
The unfavorable labor rate variance in October means the actual rate for an
hour of labor is greater than budgeted. The favorable labor efficiency
variance means the actual hours used are less than budgeted. Together,
Exercise 21-17 (20 minutes)
1. Predetermined overhead rate computations
Expected volume……………………………….…………………………... 75%
Expected total overhead……………..………………………………….. $2,100,000
Expected hours……………………………….…..….…….….….….….… 375,000 hrs.
2. Variable overhead cost variance
Variable overhead cost incurred [given]…………..…………………..…..….……$1,375,000
Fixed overhead cost variance
Fixed overhead cost incurred [given]…………………………….….….….$ 628,600
Financial and Managerial Accounting, 6th Edition
Exercise 21-18A (20 minutes)
1.
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
$25,000 F
(Total variable overhead variance)
Interpretation:
The $15,000 unfavorable spending variance means the actual cost of variable
overhead is more than budgeted. This unfavorable variance can occur
because the cost of variable overhead is greater than budgeted or because
more variable items are consumed than anticipated. It could also be a
Exercise 21-18A (continued)
2.
Fixed overhead spending and volume variances
Actual Overhead Budgeted Overhead Applied Overhead
(Given) (Given) 350,000 x $1.60
hours per hour
Interpretation
The $28,600 unfavorable spending variance means actual cost of fixed
overhead is more than budgeted.
3. The controllable variance is computed as:
Variable overhead spending variance…………….………….….… $15,000 U
Fixed overhead spending variance………………..….…….….….. 28,600 U
Controllable variance…………..……………..………………………….. $ 3,600 U
The controllable variance refers to activities that are considered within
Financial and Managerial Accounting, 6th Edition
Exercise 21-19 (20 minutes)
Information given
Planned units to be produced = 80% x 50,000 capacity = 40,000 units
Planned hours of direct labor = 25,000 hours
Total standard hrs. for actual production: 35,000 units x 0.625/unit = 21,875 hours
1. Total overhead planned at 80% level (25,000 direct labor hours)
Predetermined
Cost
Cost per
Hour
Fixed overhead………………..….….….. $ 50,000 $ 2.00
2. Total overhead variance
Total actual overhead (given)…………..……………….……………….….….……...$305,000
Exercise 21-20 (30 minutes)
1. Preliminary variance computations
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
22,000 x $11 21,875 x $11
$ * $242,000 $240,625
$ *
$ 1,375 U
(Spending variance)
(Volume variance)
$ *
(Total fixed overhead variance)
* Not computable from information given
2. Overhead controllable variance*
Total actual overhead (given) $305,000
Flexible budget overhead
Financial and Managerial Accounting, 6th Edition