Title: Exercise 23-1
QA_Ori:
Item Cost
a. Bike frames Variable
b. Screws for assembly Variable
c. Repair expense for tools (If these costs are only remotely
related to volume, they may be better classified as fixed)
Variable
* Incoming shipping expenses are variable with respect to the number (volume)
of incoming shipments, not production.
** Gas used for heating is often a mixed cost rather than strictly variable.
Title: Exercise 23-2
QA_Ori:
TEMPO COMPANY
Flexible Budgets
For Quarter Ended March 31, 2013
Flexible Budget Flexible Flexible Flexible
Variable
Amount
per
Unit*
Total
Fixed
Cost
Budget for
Unit Sales
of 6,000
Budget for
Unit Sales
of 7,000
Budget for
Unit Sales
of 8,000
Sales $400.0
0
$2,400,000 $2,800,000 $3,200,000
Variable costs
Direct materials 40.00 240,000 280,000 320,000
177.00
Contribution margin $223.0
0
1,338,000 1,561,000 1,784,000
Fixed costs
operations
* Equals total variable costs divided by the volume of 7,000 units.
Title: Exercise 23-3
QA_Ori:
SOLITAIRE COMPANY
Flexible Budget Performance Report
For Month Ended June 30
Flexible Actual
Budget Results Variances
Sales (10,800 units) $540,000 $540,000 $ 0
Supporting computations
Total fixed budget sales $ 420,000
QA_Edit:
Title: Exercise 23-4
QA_Ori:
BAY CITY COMPANY
Flexible Budget Performance Report
For Month Ended July 31
Flexible Actual
Budget Results Variances
Sales (7,200 units) $720,000 $737,000 $17,000 F
Variable expenses 468,000 483,000 15,000 U
Supporting computations
Total fixed budget sales $
750,000
Total units budgeted ÷
7,500
Title: Exercise 23-5
QA_Ori:
1.
October variances
October variances
Preliminary computations
Direct labor cost variances
Actual units at actual cost [16,250 hrs. @ $15.20] $247,000
Alternate solution format
Rate variance = AH x (AR – SR)
hour
Efficiency variance = (AH – SH) x SR
hour
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
Direct labor cost variances
hours per hour hours per hour hours per hour
(Rate variance)
(Efficiency variance)
(Total labor variance)
2.
The unfavorable labor rate variance in October means the actual rate for an hour
of labor is greater than budgeted. The favorable labor efficiency variance means
QA_Edit:
1.
October variances
October variances
Title: Exercise 23-6
QA_Ori:
1. Predetermined overhead rate computations
Expected volume 75%
2. Variable overhead cost variance
Variable overhead cost incurred [given] $1,375,000
Fixed overhead cost incurred [given] $ 628,600
QA_Edit:
Title: Exercise 23-7A
QA_Ori:
1.
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
hours per hour hours per hour
(Spending variance)
(Efficiency variance)
(Total variable overhead variance)
Interpretation:
The $15,000 unfavorable spending variance means the actual cost of variable
overhead is more than budgeted. This unfavorable variance can occur because
The $40,000 favorable efficiency variance occurs because the actual labor hours
2.
Fixed overhead spending and volume variances
Actual Overhead Budgeted Overhead Applied Overhead
(Given) (Given) 350,000 x $1.60
hours per hour
(Spending variance)
(Volume variance)
(Total fixed overhead variance)
Interpretation
The $28,600 unfavorable spending variance means actual cost of fixed overhead
is more than budgeted.
3. The controllable variance is computed as:
Variable overhead spending variance $15,000 U
The controllable variance refers to activities that are considered within
Title: Exercise 23-8
QA_Ori:
1. Preliminary computations
Actual quantity: 22,000 bd. ft. (given)
ft.
Direct material cost variances
Actual units at actual cost [22,000 bd. ft. @ $12.10] $266,200
Price and quantity variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
bd. ft. per bd. ft. bd. ft. per bd. ft. bd. ft. per bd. ft.
(Price variance)
(Quantity variance)
(Total materials variance)
Alternate solution format
Price variance = AQ x (AP – SP)
Quantity variance = (AQ – SQ) x SP
2. The unfavorable price variance means the actual price paid is more than the