Exercise 23-22 (25 minutes)
Preliminary calculations:
Variable overhead rate per DL hour = $32,000/32,000 = $1 per hour
Part 1
Total actual overhead (given) ………………………… $81,700
Flexible budget overhead
Part 2
Total budgeted fixed overhead (given) ………………
$48,000
Exercise 23-22 (continued)
Part 3
BLAZE CORP.
Overhead Variance Report
For Month Ended March 31
Volume Variance
Expected production level………………………………….80% of capacity
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials……………………..$11,250 $10,000 $1,250 F
Indirect labor……………………………18,000 16,000 2,000 F
* F = Favorable variance; and U = Unfavorable variance.
Exercise 23-23 (25 minutes)
1. Sales price and sales volume variances
Sales Actual Sales Flexible Budget Fixed Budget
Units 350 350 365
2. Interpretation
The $35,000 favorable sales price variance implies it sold computers for a
PROBLEM SET A
Problem 23-1A (60 minutes)
Part 1
Variable or Fixed Classification
Amount
per unit
Variable sales (total divided by 15,000 units)
Sales………………………………………………………………………………….. $ 200.00
Variable costs (total divided by 15,000 units)
Direct materials…………………………………………………………………… $ 65.00
Fixed costs
Depreciation—Plant equipment……………………………………………. $ 300,000
Utilities ($195,000 – $45,000 variable)…………………………………….. 150,000
Problem 23-1A (Continued)
Part 2
PHOENIX COMPANY
Flexible Budgets
For Year Ended December 31, 2015
Flexible Budget Flexible Flexible
Variable
Amount
per Unit
Total
Fixed
Cost
Budget for
Unit Sales
of 14,000
Budget for
Unit Sales
of 16,000
Sales………………………………. $200.00 $2,800,000 $3,200,000
Variable costs
Direct materials…………….. 65.00 910,000 1,040,000
Fixed costs
Depreciation—Plant Equip.... $ 300,000 300,000 300,000
Utilities…………………………. 150,000 150,000 150,000
Problem 23-1A (Continued)
Part 3
Operating income increase for a 15,000 to 18,000 unit sales increase
Possible sales (units)……………………………………………………. 18,000 Units
Contribution margin per unit…………………………………………. x $101
*Alternate solution format
Unit increase………………………………………………………………………………….. 3,000 Units
Since there is no increase in fixed costs, the expected increase in operating
income is the same $303,000.
Part 4
Operating income (loss) at 12,000 units
Possible sales (units)……………………………………………………. 12,000 Units
Problem 23-2A (45 minutes)
Part 1
PHOENIX COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2015
Flexible Actual
Budget Results Variances*
Sales (18,000 units)……………………. $3,600,000 $3,648,000 $48,000 F
Variable costs
Direct materials……………………….. 1,170,000 1,185,000 15,000 U
Direct labor……………………………… 270,000 278,000 8,000 U
Fixed costs
Depreciation—Plant equip………… 300,000 300,000 0
Utilities……………………………………. 150,000 147,500 2,500 F
*F = Favorable variance; and U = Unfavorable variance.
Problem 23-2A (Continued)
Part 2
(a) Analysis of sales variance
Total Per unit
Budgeted sales…………………………………………………….$3,600,000 $200.00
* (rounded)
Interpretation: The sales variance is favorable because the actual price
was higher than planned.
(b) Analysis of direct materials variance
Total Per unit
Budgeted materials………………………………………………$1,170,000 $ 65.00
Interpretation: The direct materials variance is unfavorable for two
Problem 23-3A (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
Fixed costs (per month)
Depreciation—Building……………………………………………………….. $ 24,000
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
Fixed overhead costs
Depreciation—Building…... $ 24,000 24,000 24,000 24,000
Depreciation—Mach……….. 80,000 80,000 80,000 80,000
Problem 23-3A (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Actual material used: 91,000 lbs. (given)
Direct material cost variances
Actual units at actual cost [91,000 lbs. @ $5.10]……………………………….$464,100
Direct Materials Price and Quantity Variances
Actual Costs
AQ x AP AQ x SP
Standard Costs
SQ x SP
Alternate solution format
Price variance = AQ x (AP – SP)
Quantity variance = (AQ – SQ) x SP
Price variance…………………..$ 9,100 U