Problem 21-3A (60 minutes)
Part 1
Variable or Fixed Classification Amount
Variable costs (total divided by 15,000 units)
Indirect materials…….………………………………...….…….….…….……... $ 3.00
Indirect labor……..……………………………..……….….…….…….….……... 12.00
Total variable costs………..………………………………..…………….……... $ 24.00
Fixed costs (per month)
Depreciation—Building…………………………………..….….…….….……. $ 24,000
Depreciation—Machinery……………..………………………………..….….. 80,000
Part 2
ANTUAN COMPANY
Flexible Overhead Budgets
For Month Ended October 31
Flexible Budget Flexible Flexible Flexible
Variable
Amount
per Unit
Total
Fixed
Cost
Budget for
Unit Sales
of 13,000
Budget for
Unit Sales
of 15,000
Budget for
Unit Sales
of 17,000
Variable overhead costs
Indirect materials……..........$ 3.00 $ 39,000 $ 45,000 $ 51,000
Repairs and maint…...……… 6.00 78,000 90,000 102,000
Total variable costs…….……$24.00 312,000 360,000 408,000
Fixed overhead costs
Depreciation—Building...... $ 24,000 24,000 24,000 24,000
Depreciation—Mach…........ 80,000 80,000 80,000 80,000
Taxes and insurance……..… 12,000 12,000 12,000 12,000
Problem 21-3A (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Actual material used: 91,000 lbs. (given)
Standard quantity of materials: 15,000 units x 6 lb./unit = 90,000 lb.
Direct material cost variances
Actual units at actual cost [91,000 lbs. @ $5.10]……………………..…………$464,100
Direct Materials Price and Quantity Variances
Actual Costs
AQ x AP AQ x SP
Standard Costs
SQ x SP
$464,100 $455,000 $450,000
$9,100 U
(Price variance)
$5,000 U
(Quantity variance)
= 91,000 lb. x ($0.10) per lb.
= $9,100 U
Quantity variance = (AQ – SQ) x SP
= (91,000 – 90,000) lb. x $5.00 per lb.
= 1,000 lb. x $5.00 per lb.
= $5,000 U
Financial and Managerial Accounting, 6th Edition
1254
Problem 21-3A (Continued)
Part 4 Direct labor variances
Preliminary computations
Actual hours used: 30,500 hours (given)
Standard hours: 15,000 units x 2 hrs./unit = 30,000 hours
Direct labor cost variances
Actual units at actual cost [30,500 hrs. @ $17.25]……………….………..…………….$526,125
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR AH x SR
Standard Costs
SH x SR
30,500 x $17.25 30,500 x $17.00 30,000 x $17.00
hours per hr. hours per hr. hours per hr.
$526,125 $518,500 $510,000
Alternate solution format
Rate variance = AH x (AR – SR)
= 30,500 hours x ($17.25 – $17.00) per hour
= 30,500 x $0.25 per hour
= $7,625 U
Rate variance…………..…...... $ 7,625 U
Efficiency variance…......….. 8,500 U
Total……………………………….. $16,125 U
Problem 21-3A (Concluded)
Part 5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Volume Variance
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Power………………..……………………………….45,000 43,000 2,000 F
Repairs and maintenance………………..…. 90,000 96,000 6,000 U
Total variable costs……………….…….…..…360,000 361,000 1,000 U
Fixed overhead costs
Supervision……………………………….….…... 79,000 89,000 10,000 U
Total fixed costs……………….….…….…..…. 195,000 199,500 4,500 U
Total overhead costs……………..………….….$555,000 $560,500 $ 5,500 U
*F = Favorable variance; and U = Unfavorable variance.
Financial and Managerial Accounting, 6th Edition
Problem 21-4A (40 minutes)
Part 1 Direct Materials Variances
Direct materials cost variances
Actual units at actual cost [1,615,000 lbs. @ $4.10]……………………..………………$6,621,500
Direct Materials Price and Quantity Variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
$161,500 U
(Price variance)
$20,000 F
(Quantity variance)
Part 2 Direct Labor Variances
Direct labor cost variance…….…………..……………………..…………..…………….……...$ 136,250 F
Direct Labor Rate and Efficiency Variances
$66,250 F
(Rate variance)
$70,000 F
(Efficiency variance)
Problem 21-4A (Continued)
Part 3 Overhead Variances
Controllable variance
Actual overhead [$2,350,000 + $2,200,000]..…..…..…..……..…...$4,550,000
Fixed overhead volume variance
Budgeted fixed overhead [given, at 80% capacity]..................$2,400,000
Fixed overhead cost applied [270,000 hrs. @ $10]....…..…….... 2,700,000
Financial and Managerial Accounting, 6th Edition
Problem 21-5AA (15 minutes)
(a) Variable overhead
Variable Overhead Spending and Efficiency Variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
265,000 x $8 270,000 x $8
$2,200,000 $2,120,000 $2,160,000
(b) Fixed overhead
Fixed Overhead Spending and Volume Variances
Actual Overhead Budgeted Overhead Applied Overhead
270,000 x $10
$2,350,000 $2,400,000 $2,700,000
(c) Controllable variance
Variable overhead spending variance……………………………… $ 80,000 U
Problem 21-6AA (45 minutes)
Part 1
Dec. 31* Work in Process Inventory………….…………………….….…….…..100,000
Direct Materials Quantity Variance……………..………..….….…..3,000
Dec. 31 Work in Process Inventory………….…………………….….…….…..95,800
Direct Labor Rate Variance……………………………….……………..1,200
Dec. 31 Work in Process Inventory………….…………………….….…….…..354,000
Controllable Variance………………………………………………………9,000
Volume Variance……………………………………………………..……...12,000
* Alternatively, some companies compute and record the price variance
when materials are purchased. This would yield two separate entries:
(1) Purchase of materials
Raw Materials Inventory…………………………………………………………………103,000
Direct Materials Price Variance……………………………………..…………..500
Accounts Payable………………………………………………..…………………..102,500
Financial and Managerial Accounting, 6th Edition
Problem 21-6AA (Continued)
Part 2
Under management by exception, the manager would first identify the largest
The largest variance amounts occur for the materials quantity variance, the
direct labor efficiency variance, and the two overhead variances. The manager
After the relatively larger amounts are explained and actions taken, the
PROBLEM SET B
Problem 21-1B (60 minutes)
Part 1
Variable or Fixed Classification
Per Unit
Amount
Variable sales (total divided by 20,000 units)
Sales…………………………………………..…………………………..…….….….. $ 150.00
Variable costs (total divided by 20,000 units)
Direct materials……………..……………………………..…….….…….…….… $ 60.00
Direct labor……………..………………………………………….…….….…….… 13.00
Machinery repairs…………………………………………….……………………. 2.85
Fixed costs
Depreciation—Machinery……………..……………………….…….….…….. $ 250,000
Total fixed costs…………..…………………………………….…….….…….…... $1,112,000
Financial and Managerial Accounting, 6th Edition