Problem 21-4B (Continued)
Part 3 Overhead Variances
Overhead controllable variance
Actual overhead incurred [$1,960,000 + $1,200,000].…..….......$ 3,160,000
Fixed overhead volume variance
Budgeted fixed overhead cost [at 80% capacity].…..…............$ 2,016,000
Problem 21-5BA (15 minutes)
(a) Variable Overhead Spending and Efficiency Variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
250,000 x $5 252,000 x $5
$1,200,000 $1,250,000 $1,260,000
(b) Fixed Overhead Spending and Volume Variances
Actual Overhead Budgeted Overhead Applied Overhead
252,000 x $7
$1,960,000 $2,016,000 $1,764,000
(c) Controllable variance
Variable overhead spending variance……..………………..…….. $ 50,000 F
Variable overhead efficiency variance……..………….…….……. 10,000 F
Financial and Managerial Accounting, 6th Edition
Problem 21-6BA (45 minutes)
Part 1
June 30* Work in Process Inventory………………………………….…….…….130,000
Direct Materials Quantity Variance…………..……..….…… 5,000
June 30 Work in Process Inventory……………………….……….….…….…..67,500
Direct Labor Rate Variance………………………….…………………..500
June 30 Work in Process Inventory……………………….……….….…….…..230,000
Controllable Variance…………..……………..…………………………..8,000
* 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…………………………………………………………………125,000
Direct Materials Price Variance……………………………………..…..………1,500
Accounts Payable…………………………………………………..…..…………...123,500
Problem 21-6BA (Concluded)
Part 2
Under management by exception, the manager would first identify the largest
variances, attempt to uncover their causes, and then implement actions aimed
The largest variance amounts occur for the materials quantity variance, the
materials price variance, the direct labor efficiency variance, and the volume
and controllable overhead variances. The manager should go to the
purchasing department to determine why materials were acquired at a lower
lower-level managers would be called on to explain what happened.
After the relatively larger amounts are explained and actions taken, the
Financial and Managerial Accounting, 6th Edition
SERIAL PROBLEM — SP 21
Serial Problem, Business Solutions (30 minutes)
Business Solutions
Flexible Budget Performance Report
For Quarter Ended June 30
Flexible Actual
Budget Results Variances
Desk sales (150 units)……….……………….…$187,500 $186,000 $1,500 U
Chair sales (80 units)……..………….…….…..
Variable expenses….…………………..……..…
40,000
132,500
41,200
132,880
1,200
380
F
U
Supporting computations
Total budgeted desk sales…………….………………………...…..…....$180,000
Total units budgeted………………………………………………………….. 144
Total budgeted chair sales………………………………………………….$ 36,000
Total units budgeted………………………………………………………….. 72
Budgeted selling price…………………………………………….……..….$500 per unit
Flexible budget units…………………………………………………………. 80
Serial Problem, Business Solutions (concluded)
Total budgeted variable costs for chairs…………………...…..…...$18,000
Total units budgeted………………………………………………………….. 72
Total budgeted variable expenses*…………………….…………..…..$132,500
*($112,500 + $20,000), from calculation above
Total actual expenses…………………………………………………………$163,880
Financial and Managerial Accounting, 6th Edition