Problem 23-3A (Continued)
Part 4 Direct labor variances
Preliminary computations
Actual hours used: 30,500 hours (given)
Direct labor cost variances
Actual units at actual cost [30,500 hrs. @ $17.25]………………………………………$526,125
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR AH x SR
Standard Costs
SH x SR
Alternate solution format
Rate variance = AH x (AR – SR)
Efficiency variance = (AH – SH) x SR
Problem 23-3A (Concluded)
Part 5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Volume Variance
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials……………………………….$ 45,000 $ 44,250 $ 750 F
Fixed overhead costs
Depreciation—Building………………………24,000 24,000 0
Depreciation—Machinery…………………..80,000 75,000 5,000 F
*F = Favorable variance; and U = Unfavorable variance.
Problem 23-4A (40 minutes)
Part 1 Direct Materials Variances
Direct materials cost variances
Direct Materials Price and Quantity Variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
(Price variance)
(Quantity variance)
(Total materials variance)
Part 2 Direct Labor Variances
Direct labor cost variances
Actual units at actual cost [265,000 hrs. @ $13.75]…………………………………….$3,643,750
Direct Labor Rate and Efficiency Variances
Actual Cost
AH x AR AH x SR
Standard Cost
SH x SR
(Rate variance)
(Efficiency variance)
(Total labor variance)
Problem 23-4A (Continued)
Part 3 Overhead Variances
Controllable variance
Actual overhead [$2,350,000 + $2,200,000]………………………….$4,550,000
Fixed overhead volume variance
Budgeted fixed overhead [given, at 80% capacity]………………$2,400,000
Problem 23-5AA (15 minutes)
(a) Variable overhead
Variable Overhead Spending and Efficiency Variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
(Spending variance)
(Efficiency variance)
(Total variable overhead variance)
(b) Fixed overhead
Fixed Overhead Spending and Volume Variances
Actual Overhead Budgeted Overhead Applied Overhead
(Total fixed overhead variance)
(c) Controllable variance
Variable overhead spending variance…………………………….. $ 80,000 U
Problem 23-6AA (45 minutes)
Part 1
Dec. 31* Work in Process Inventory……………………………………………..100,000
To record materials costs, including
the unfavorable quantity and
favorable price variances.
Dec. 31 Work in Process Inventory……………………………………………..95,800
To record direct labor costs, including
the favorable efficiency variance and
unfavorable rate variance.
Dec. 31 Work in Process Inventory……………………………………………..354,000
To record overhead costs, including
the unfavorable volume and unfavorable
controllable variances.
* 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……………………………………………………………………103,000
Problem 23-6AA (Continued)
Part 2
Under management by exception, the manager would first identify the
The largest variance amounts occur for the materials quantity variance, the
direct labor efficiency variance, and the two overhead variances. The
After the relatively larger amounts are explained and actions taken, the
PROBLEM SET B
Problem 23-1B (60 minutes)
Part 1
Variable or Fixed Classification
Per Unit
Amount
Variable sales (total divided by 20,000 units)
Sales………………………………………………………………………………….. $ 150.00
Variable costs (total divided by 20,000 units)
Fixed costs
Depreciation—Machinery…………………………………………………….. $ 250,000
Utilities (75% fixed)……………………………………………………………… 150,000
Problem 23-1B (Continued)
Part 2
TOHONO 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 18,000
Budget for
Unit Sales
of 24,000
Sales………………………………. $150.00 $2,700,000 $3,600,000
Variable costs
Direct materials…………….. 60.00 1,080,000 1,440,000
Fixed costs
Depreciation—Mach……….. $ 250,000 250,000 250,000
Utilities…………………………. 150,000 150,000 150,000
Problem 23-1B (Continued)
Part 3
Operating income increase for a 20,000 to 28,000 unit sales increase
Potential sales (units)…………………………………………………… 28,000 Units
Contribution margin per unit…………………………………………. x $61.85
*Alternate solution format
Since there is no increase in fixed costs, the expected increase in operating
Part 4
Operating income (loss) at 14,000 units
Potential sales (units)…………………………………………………… 14,000
Contribution margin per unit…………………………………………. x $61.85
Problem 23-2B (60 minutes)
Part 1
TOHONO COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2015
Flexible Actual
Budget Results Variances*
Sales (24,000 units)……………………. $3,600,000 $3,648,000 $48,000 F
Variable costs
Direct materials……………………….. 1,440,000 1,400,000 40,000 F
Direct labor……………………………… 312,000 360,000 48,000 U
Fixed costs
Depreciation—Machinery…………. 250,000 250,000 0
Utilities……………………………………. 150,000 154,000 4,000 U