Chapter 16 – Fundamentals of Variance Analysis
16–11
16–24. (45 min.) Sales Activity Variance: Data-2-Go.
Flexible
Budget
(based on
actual of
750,000
units)
Sales Activity
Variance
Master
Budget
(based on
budgeted
800,000
units)
Sales revenue …………………………………..………..
$2,812,500
$187,500
U
$3,000,000
Variable costs:
Blank drives …………………………………..………..
843,750
56,250
F
900,000
Direct labor ……………………………………………..
196,875
13,125
F
210,000
Variable overhead …………………………..
365,625
24,375
F
390,000
Variable marketing and administrative .………..
281,250
18,750
F
300,000
Total variable costs ……………………………………..
$1,687,500
$112,500
F
$1,800,000
Contribution margin ……………………………………..
$1,125,000
$75,000
U
$1,200,000
Fixed costs:
Manufacturing overhead ………………….……….
$ 600,000
—
$ 600,000
Marketing ………………………………………………..
180,000
—
180,000
Administrative ………………………………..………..
112,500
—
112,500
Total fixed costs ………………………………..………..
$892,500
—
$892,500
Operating profits ………………………………..………..
$ 232,500
$75,000
U
$ 307,500
Chapter 16 – Fundamentals of Variance Analysis
16–13
16–26. (15 min.) Assigning Responsibility: Wallace Manufacturing.
Answers will vary. This situation is a normal part of a production department’s business
16–27. (15 min.) Assigning Responsibility: Davidson Communications.
It appears that the Building 404 manager acted against the best interests of the company
16–28. (10 min.) Variable Cost Variances.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$91,000
$28 x 3,200
= $89,600
$28 x 0.5 x 5,600
= $78,400
$1,400 U
$11,200 U
Chapter 16 – Fundamentals of Variance Analysis
16–14
16–29. (20 min.) Variable Cost Variances: Sills, Inc.
Direct labor:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$546,000
$546,000 – 19,500
= $526,500
$20.25a x 27,000
= $546,750
$19,500 U
$20,250 F
Variable overhead:
$132,600
$5.25 x 26,000
= $136,500
$5.25 x 27,000
= $141,750
$3,900 F
$5,250 F
Chapter 16 – Fundamentals of Variance Analysis
16–30. (20 min.) Variable Cost Variances: Simon Company.
Direct labor:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$1,975,000
$20a x 92,000
= $1,840,000
$20a x 1.5 x
60,000
= $1,800,000
$135,000 U
$40,000 U
Variable overhead:
$2,560,000
$30 x 92,000
= $2,760,000
$30 x 1.5 x
60,000
= $2,700,000
$200,000 F
$60,000 U
aStandard labor wage rate
= [(Direct labor efficiency variance) ÷ Variable overhead efficiency variance)] x $30.
= [$40,000 ÷ $60,000] x $30 = $20
Chapter 16 – Fundamentals of Variance Analysis
16–16
16–31. (15 min.) Variable Cost Variances: Thurmster Corporation.
a.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$98,550
$12.60 x 7,500
= $94,500
$89,775
$4,050 U
$4,725 U
Report to management:
The total variance from the flexible budget is $8,775 unfavorable. This variance was
caused by higher than expected prices ($4,050) and the use of more units than
expected ($4,725).
b.
Work-in-Process Inventory ……………….………….
89,775
Materials Price Variance ………………….……….
4,050
Materials Efficiency Variance ………………………..
4,725
Accounts Payable ………………………..
98,550
To record the purchase and use of 7,500 units of
materials at an actual cost of $98,550 and the transfer to
work in process at a standard cost of $12.60 per unit.
Chapter 16 – Fundamentals of Variance Analysis
16–17
16–32. (20 min.) Variable Cost Variances: Canyon Chemical. (Appendix used in
Part b.)
a.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$650,000
$11.25 x 57,600
= $648,000
$11.25 x 52,800
= $594,000
$2,000 U
$54,000 U
b.
Work-in-Process Inventory …………………………..
594,000
Materials Efficiency Variance ………………………..
54,000
Materials Price Variance ……………….………….
2,000
Accounts Payable …………………………..
650,000
To record the purchase and use of 57,600 gallons of
chemical Y at an actual cost of $650,000 and the transfer
to work in process at a standard cost of $11.25 per gallon.
Chapter 16 – Fundamentals of Variance Analysis
16–18
16–33. (20 min.) Fixed Cost Variances: Carney Co.
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$385,500
$369,000
$360,000
$16,500 U
$9,000 U
$25,500 U
16–34. (15 min.) Graphical Presentation: Carney Co.
Chapter 16 – Fundamentals of Variance Analysis
16–19
16–35. (20 min.) Fixed Cost Variances: Hilo Corporation.
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$400,000
$415,000
$3.30 x 130,000
= $429,000
$15,000 F
$14,000 F
$29,000 F
Chapter 16 – Fundamentals of Variance Analysis
16–20
16–36. (20 min.) Fixed Cost Variances: Stoker Corporation.
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$413,000c
$0.50 x 806,000a
$403,000
$0.50 x 800,000b
= $400,000
$10,000 U
$3,000 U
$13,000 F
a. Budgeted volume = $403,000 ÷ $0.50 per unit = 806,000 units.
b. Overhead applied = Budgeted overhead – Production volume variance
= $403,000 – $3,000 = $400,000.
Actual volume = $400,000 ÷ $0.50 per unit = 800,000 units.
c. Actual fixed overhead = Budgeted overhead + Overhead price variance
= $403,000 + $10,000 = $413,000