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Problem 23-2B (Continued)
Part 2
(a) Analysis of sales variance
Total Per unit
Budgeted sales.............................................................$3,600,000 $150.00
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......................................................$1,440,000 $ 60.00
* (rounded)
Interpretation: The direct materials variance is favorable for two possible
Problem 23-3B (60 minutes)
Part 1
Variable costs (total divided by 15,000 units) Per Unit
Amount
Indirect materials………………………………… $ 1.50
Fixed costs (total) Total
Amount
Depreciation—Building………………………… $ 24,000
Problem 23-3B (Continued)
Part 2
SUNCOAST COMPANY
Flexible Overhead Budgets
For Month Ended December 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....................$ 1.50 $ 19,500 $ 22,500 $ 25,500
Indirect labor........................... 6.00 78,000 90,000 102,000
Fixed overhead costs
Depreciation—Building.......... $ 24,000 24,000 24,000 24,000
Depreciation—Machinery....... 72,000 72,000 72,000 72,000
Problem 23-3B (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Actual material used: 69,000 lbs. (given)
Direct material cost variances
Direct Materials Price and Quantity Variances
Actual Costs
AQ x AP AQ x SP
Standard Costs
SQ x SP
(Total materials variance)
Alternate solution format
Price variance = AQ x (AP - SP)
Quantity variance = (AQ – SQ) x SP
Problem 23-3B (Continued)
Part 4 Direct labor variances
Preliminary computations
Actual hours used: 22,800 hours (given)
Direct labor cost variances
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR AH x SR
Standard Costs
SH x SR
(Rate variance)
(Efficiency variance)
(Total labor variance)
Alternate solution format
Rate variance = AH x (AR - SR)
Efficiency variance = (AH - SH) x SR
Problem 23-3B (Concluded)
Part 5
SUNCOAST COMPANY
Overhead Variance Report
For Month Ended December 31
Volume Variance
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials....................................$ 22,500 $ 21,600 $ 900 F
Fixed overhead costs
Depreciation—Building.......................... 24,000 24,000 0
Depreciation—Machinery....................... 72,000 75,000 3,000 U
*F = Favorable variance; and U = Unfavorable variance
Problem 23-4B (50 minutes)
Part 1 Direct Materials Variances
Direct materials cost variances
Actual units at actual cost [1,000,000 lbs. @ $4.25]..........................................$4,250,000
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
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 23-4B (Continued)
Part 3 Overhead Variances
Overhead controllable variance
Actual overhead incurred [$1,960,000 + $1,200,000]................$ 3,160,000
Fixed overhead volume variance
Budgeted fixed overhead cost [at 80% capacity].....................$ 2,016,000
Problem 23-5BA (15 minutes)
(a) 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 Spending and Volume Variances
Actual Overhead Budgeted Overhead Applied Overhead
(Spending variance)
(Volume variance)
(Total fixed overhead variance)
(c) Controllable variance
Variable overhead spending variance................................... $ 50,000 F
To record materials costs, including
the favorable quantity and
favorable price variances.
June 30 Work in Process Inventory.....................................................67,500
To record direct labor costs, including
the favorable efficiency variance and
unfavorable rate variance.
June 30 Work in Process Inventory.....................................................230,000
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..............................................................................125,000
(2) Issuance of materials into production
Work in Process Inventory.........................................................................130,000
