Exercise 23-2 (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
Direct labor..………………… 70.00 420,000 490,000 560,000
* Equals total variable costs divided by the volume of 7,000 units.
Exercise 23-3 (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
Supporting computations
Total fixed budget sales……………………………………………….$ 420,000
Total fixed budget units……………………………………………….÷ 8,400
Exercise 23-4 (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 $17,000 F
Supporting computations
Total fixed budget sales……………………………………..$ 750,000
Total units budgeted…………………………………………..÷ 7,500
Budgeted selling price……………………………………….$100 per unit
Exercise 23-5 (10 minutes)
Exercise 23-6 (5 minutes)
Following management by exception, the company should focus on those
variances that exhibit the greatest differences from the standard. This
Exercise 23-7 (15 minutes)
Exercise 23-8 (10 minutes)
(1) The standard cost for one unit is computed as:
Direct materials (6 lbs. @$8 per lb.)……………………………………….. $ 48
Exercise 23-8 (continued)
(2) Total cost variance
Actual costs incurred during the month:
Direct materials (48,500 x $8.10)………………………………………………………$392,850
Standard overhead costs to produce actual activity:
Direct materials (8,000 x 6 lbs. x $8 per lb.)……………………………………….$384,000
Total actual manufacturing costs ……………………………………………………
$849,900
Exercise 23-9 (15 minutes)
Direct materials price variance:
Actual cost of direct materials used (48,500 x $8.10)…………………………$392,850
Direct materials quantity variance:
Actual quantity used x Standard price (48,500 x $8.00)……………………..$388,000
Exercise 23-10 (15 minutes)
Direct labor rate variance:
Actual hours x Actual rate per hour (15,700 x $16.50)………………………..$259,050
Direct labor efficiency variance:
Actual hours x Standard rate per hour (15,700 x $16.00)……………………$251,200
Exercise 23-11 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (138,000 x $3.75)……………………….$517,500
Direct materials quantity variance:
Actual quantity used x Standard price (138,000 x $4.00)……………………$552,000
Exercise 23-11 (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 23-12 (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
Part 2 Direct labor rate variance:
Actual hours x Actual rate per hour (37,600 x $6.05)………………………….$227,480
Direct labor efficiency variance:
Actual hours x Standard rate per hour (37,600 x $6.00)……………………..$225,600
Exercise 23-13 (30 minutes)
1. Preliminary computations
Actual quantity: 22,000 bd. ft. (given)
Direct material cost variances
Actual units at actual cost [22,000 bd. ft. @ $12.10]…………………………..$266,200
Price and quantity variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
Alternate solution format
Price variance = AQ x (AP – SP)
Quantity variance = (AQ – SQ) x SP
Price variance…..…….………..$ 2,200 U
2. The unfavorable price variance means the actual price paid is more than
the budgeted price. The favorable quantity variance means the actual
Exercise 23-14A (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