Exercise 23-15 (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
Exercise 23-16 (30 minutes)
1.
October variances
Preliminary computations
Actual hours: 16,250 hours (given)
Direct labor cost variances
Rate and efficiency variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
Alternate solution format
Rate variance = AH x (AR – SR)
Efficiency variance = (AH – SH) x SR
Rate variance……………………$3,250 U
Exercise 23-16 (Concluded)
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
Direct labor cost variances
Rate and efficiency variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
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 23-17 (20 minutes)
1. Predetermined overhead rate computations
Expected volume………………………………………………………….. 75%
Expected total overhead……………………………………………….. $2,100,000
2. Variable overhead cost variance
Variable overhead cost incurred [given]…………………………………………..$1,375,000
Fixed overhead cost variance
Fixed overhead cost incurred [given]………………………………………$ 628,600
Exercise 23-18A (20 minutes)
1.
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
Interpretation:
The $15,000 unfavorable spending variance means the actual cost of
variable overhead is more than budgeted. This unfavorable variance can
The $40,000 favorable efficiency variance occurs because the actual labor
Exercise 23-18A (continued)
2.
Fixed overhead spending and volume variances
Actual Overhead Budgeted Overhead Applied Overhead
Interpretation
The $40,000 unfavorable volume variance is the result of the company
3. The controllable variance is computed as:
Variable overhead spending variance…………………………….. $15,000 U
The controllable variance refers to activities that are considered within
Exercise 23-19 (20 minutes)
Information given
Planned units to be produced = 80% x 50,000 capacity = 40,000 units
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 23-20 (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
Fixed overhead spending and volume variances
Actual Overhead Budgeted Overhead Applied Overhead
(Given) 21,875 x $2
$ *
(Total fixed overhead variance)
* Not computable from information given
2. Overhead controllable variance*
Total actual overhead (given) $305,000
Flexible budget overhead
* Alternative solution approach: We know the overhead controllable variance is equal to the
total overhead variance less the overhead volume variance. Then, using the results from parts
1 and 2, we can compute the overhead controllable variance as
EX
Exercise 23-21 (25 minutes)
Preliminary calculations:
Variable overhead rate per DL hour = $48,000/24,000 = $2 per hour
Part 1
Total actual overhead (given) ………………………… $99,250
Flexible budget overhead
Variable ($2 per hour x 27,000 hours)…………………. $54,000
Part 2
Exercise 23-21 (continued)
Part 3
JAMES CORP.
Overhead Variance Report
For Month Ended May 31
Volume Variance
Expected production level…………………………………………..80% of capacity
Production level achieved……………………………………………90% of capacity
Volume variance…………………………………………………………$5,550 (favorable)
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials………………………………$16,875 $15,000 $1,875 F
Indirect labor…………………………………….27,000 26,500 500 F
* F = Favorable variance; and U = Unfavorable variance.