Chapter 23 – Flexible Budgets and Standard Costs
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 of
inventory purchased.
Exercise 23-15 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (16,000 x $4.05)…………..…….…….…$ 64,800
Actual quantity used x Standard price (16,000 x $4.00)………….…….……. 64,000
Direct materials price variance (unfavorable)……………..….…….…….……..$ 800
Direct materials quantity variance:
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Chapter 23 – Flexible Budgets and Standard Costs
*30,000 units x ½ pound per unit = 15,000 pounds
Part 2
Direct labor rate variance:
Direct labor efficiency variance:
Actual hours x Standard rate per hour (5,545 x $20.00)………….…….…….$110,900
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Chapter 23 – Flexible Budgets and Standard Costs
Exercise 23-16 (30 minutes)
1.
October variances
Preliminary computations
Actual hours: 16,250 hours (given)
Standard hours: 5,600 units x 3 hrs./unit = 16,800 hrs.
Direct labor cost variance………..………..……….………..………..………..……………..….$ 5,000 F
Rate and efficiency variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
hours per hour hours per hour hours per hour
$247,000 $243,750 $252,000
$3,250 U
(Rate variance)
$8,250 F
(Efficiency variance)
$5,000 F
(Total labor variance)
Alternate solution format
= (-550 hours) x $15.00 per hour
= $8,250 F
Rate variance………..….........$3,250 U
Efficiency variance…...…..... 8,250 F
Total………………………………..$5,000 F
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Education.
Chapter 23 – Flexible Budgets and Standard Costs
Exercise 23-16 (Concluded)
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
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
22,000 x $15.25 22,000 x $15.00 18,000 x $15.00
hours per hour hours per hour hours per hour
2.
The unfavorable labor rate variance in October means the actual rate for an
hour of labor is greater than budgeted. The favorable labor efficiency
variance means the actual hours used are less than budgeted. Together,
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Chapter 23 – Flexible Budgets and Standard Costs
Exercise 23-17 (20 minutes)
1. Predetermined overhead rate computations
Expected volume…………………………………………………….……… 75%
2. Variable overhead cost variance
Fixed overhead cost variance
Fixed overhead cost incurred [given]………………………….…….……..$ 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
$15,000 U $40,000 F
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Education.
Chapter 23 – Flexible Budgets and Standard Costs
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
Exercise 23-18A (continued)
2.
Fixed overhead spending and volume variances
Actual Overhead Budgeted Overhead Applied Overhead
(Given) (Given) 350,000 x $1.60
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Chapter 23 – Flexible Budgets and Standard Costs
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
Variable overhead efficiency variance…………….…….…….….. 40,000 F
indicates that overall, management performed relatively poorly in controlling
overhead costs.
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Chapter 23 – Flexible Budgets and Standard Costs
Exercise 23-19 (20 minutes)
Information given
Planned units to be produced = 80% x 50,000 capacity = 40,000 units
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
(Spending variance)
(Efficiency variance)
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Chapter 23 – Flexible Budgets and Standard Costs
$ *
(Total variable overhead variance)
Fixed overhead spending and volume variances
$ *
(Total fixed overhead variance)
* Not computable from information given
2. Overhead controllable variance*
Total actual overhead (given) $305,000
Fixed (given)…………………………………….…….…….……
50,000
1 and 2, we can compute the overhead controllable variance as
Overhead controllable variance = $20,625 U – $6,250 U = $14,375 U
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Chapter 23 – Flexible Budgets and Standard Costs
EX
Exercise 23-21 (25 minutes)
Preliminary calculations:
Standard number of DL hours = 9,000 units x 3 = 27,000
Part 1
Total actual overhead (given) ………………………… $99,250
Flexible budget overhead
Part 2
Total budgeted fixed overhead (given) ………………
$44,400
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