Chapter 16 – Fundamentals of Variance Analysis
16–37. (45 min.) Comprehensive Cost Variance Analysis: Wagner, Inc.
a. Variable cost:
Direct materials:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP x AQ)
(SP x AQ)
(SP x SQ)
$2.70 x 192,000
= $518,400
$3.00 x 192,000
= $576,000
$3 x 4 lbs x 46,000
= $552,000
$57,600 F
$24,000 U
Direct labor:
$13.80 x 35,200
= $485,760
$13.50 x 35,200
= $475,200
$13.50 x 0.8 hrs x
46,000
= $496,800
$10,560 U
$21,600 F
Variable overhead:
$132,192
$15 x 8,640
= $129,600
$15 x 0.18 hrs x 46,000
= $124,200
$2,592 U
$5,400 U
Chapter 16 – Fundamentals of Variance Analysis
16–22
16-37. (continued)
b. Fixed overhead variances:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$1,075,000
$1,000,000
$20 x 46,000
= $920,000
$75,000 U
$80,000 U
$155,000 U
Chapter 16 – Fundamentals of Variance Analysis
16–23
16-37. (continued)
c.
Record Costs
Direct materials:
Work-in-Process Inventory …………………………..
552,000
Materials Efficiency Variance ………………………..
24,000
Materials Price Variance ……………..
57,600
Accounts Payable ……………………...
518,400
Direct labor:
Work-in-Process Inventory …………………………..
496,800
Direct Labor Price Variance ………………………....
10,560
Direct Labor Efficiency Variance …....
21,600
Accounts Payable ………………………..
485,760
Variable overhead:
Work-in-Process Inventory …………………………...
124,200
Variable Overhead Applied ………….
124,200
Variable Overhead (Actual) …………………………..
132,192
Miscellaneous Payables and Inventory
Accounts …………………………..……………
132,192
Variable Overhead (Applied) …………………………
124,200
Variable Overhead Price Variance …………………
2,592
Variable Overhead Efficiency Variance …………..
5,400
Variable Overhead (Actual) …….
132,192
Fixed overhead:
Work-in-Process Inventory …………………………...
920,000
Fixed Overhead Applied ……………..
920,000
Fixed Overhead (Actual) ………………………………
1,075,000
Miscellaneous Payables and Inventory
Accounts …………………………………………..
1,075,000
Fixed Overhead (Applied) …………………………….
920,000
Fixed Overhead Production Volume Variance …
80,000
Fixed Overhead Price Variance …………………….
75,000
Fixed Overhead (Actual) ……………..
1,075,000
Chapter 16 – Fundamentals of Variance Analysis
16-37. (continued)
Transfer to Finished Goods
Finished Goods Inventory …………………………………….
2,093,000
Work-in-Process Inventory ……………………….
2,093,000
Cost of Goods Sold …………………………………………….
2,093,000
2,093,000
Direct Labor Efficiency Variance ……………………………….
Chapter 16 – Fundamentals of Variance Analysis
16–25
16–38. (30 min.) Comprehensive Cost Variance Analysis: Pueblo Service.
a. Variable cost variances:
Oil specialist:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP x AQ)
(SP x AQ)
(SP x SQ)
$13 x 79,200a
= $1,029,600
$12 x 79,200 hrs
= $950,400
$12 x 66,000b
= $792,000
$79,200 U
$158,400 U
Variable overhead:
$7.50 x 0.14 hrs
x 396,000
= $415,800
$8 x 0.14 hrs
x 396,000
= $443,520
$8 x 49,500 hoursc
= $396,000
$27,720 F
$47,520 U
a 79,200 = 0.20 hours x 396,000 changes.
b 66,000 = 1/6 hour x 396,000 changes.
c 49,500 = 0.125 hour x 396,000 changes.
Chapter 16 – Fundamentals of Variance Analysis
16–26
16-38. (continued)
b. Fixed overhead variances:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$500,000
$432,000
$1.20 x 396,000
= $475,200
$68,000 U
$43,200 F
$24,800 U
Chapter 16 – Fundamentals of Variance Analysis
16–27
16–39. (20 min.) Overhead Variances: Three Bridges, Inc.
Variable overhead:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP x AQ)
(SP x AQ)
(SP x SQ)
$516,000
$36 x 14,500
= $522,000
$36 x 14,000
= $504,000
$6,000 F
$18,000 U
Fixed overhead:
Actual
Costs
Price
Variance
Budget
$184,000
$187,200
$3,200 F
Chapter 16 – Fundamentals of Variance Analysis
16–28
Solutions to Problems
16–40. (30 min.) Solve for Master Budget Given Actual Results: Gibson
Corporation.
a.
Master Budget
Computations
Sales volume …………………………..
108,000 units
Sales revenue ………………………..…
$540,000
108,000 units x $5
Variable costs:
Manufacturing ……………………..……
106,000
$540,000 – $54,000 – $380,000
Marketing and administrative ……………………..
54,000
10% x $540,000
Contribution margin …………………………..
$ 380,000
(given)
Fixed costs:
Manufacturing ……………………..……
216,000
$2 x 108,000 units
Marketing and administrative ……………………..
56,000
$380,000 – $216,000 – $108,000
Operating profit ……………………….….
$ 108,000
$1 x 108,000 units
Chapter 16 – Fundamentals of Variance Analysis
16–29
16–40. (continued)
b.
Actual
(120,000
Units)
Manu-
facturing
Variances
Marketing
and Adminis-
trative
Variances
Sales Price
Variance
Flexible
Budget
(120,000
Units)
Sales Activity
Variance
Master
Budget
(108,000
Units)
Sales revenue …………….…………….
$672,000
$72,000 F
$600,000a
$60,000 F
$540,000
Variable costs:
Manufacturing ………….……………….
147,200
$29,422 U
117,778d
11,778 U
106,000
Marketing and admin. .………………………….
61,400
______
$ 1,400 U
_______
60,000c
6,000 U
54,000
Contribution margin ……..……………………
$463,400
$29,422 U
$ 1,400 U
$72,000 F
$422,222b
$42,222 F
$380,000
Fixed costs:
Manufacturing ………….……………….
205,000
11,000 F
216,000
—
216,000e
Marketing and admin. .………………………….
113,200
______
57,200 U
_______
56,000
—
56,000g
Operating profit …………..………………
$145,200
$18,422 U
$58,600 U
$72,000 F
$150,222
$42,222 F
$108,000f
a 120,000 units x $5
b
$380,000
x 120,000 units
108,000 units
c 10% x $600,000
d Solved after determining flexible budget sales revenue, contribution margin, and variable marketing and administrative.
Chapter 16 – Fundamentals of Variance Analysis
16–30
16–41. (30 min.) Find missing data for profit variance analysis.
Actual
(1,500
Units)
Manu-
facturing
Variance
Marketing
& Adminis-
trative
Variance
Sales
Price
Variance
Flexible
Budget
(1,500a
Units)
Sales
Activity
Variance
Master
Budget
(1,600
Units)
Sales revenue …………………………………..………..
$39,000
$1,500 Ub
$40,500
$2,700 Uc
$43,200d
Variable manufacturing costs ………………………..
10,200e
$1,200 F
11,400f
760 F
12,160g
Variable marketing and administrative ….………..
4,000h
$500 Fi
4,500j
300 Fk
4,800
Contribution margin ……………………………………..
$24,800
$1,200 Fl
$500 Fm
$1,500 Un
$24,600o
$1,640 Up
$26,240q
Note: See computations on next page.