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Title: Problem 23-5A
QA_Ori:
Part 1
Variable or Fixed Classification
Per unit
Amount
Variable costs (total divided by 15,000 units)
Indirect materials $ 3.00
Fixed costs (per month)
Part 2
ANTUAN COMPANY
Flexible Overhead Budgets
For Month Ended October 31
Flexible Budget Flexible Flexible Flexible
Variab
le
Amou
nt 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 $
3.00
$
39,000
$ 45,000 $ 51,000
Indirect labor 12.00 156,000 180,000 204,000
0
Part 3Direct Materials Variances
Preliminary computations
Direct Materials Price and Quantity Variances
Actual Costs
AQ x AP AQ x SP
Standard Costs
SQ x SP
lbs. per lb. lbs. per lb. Lbs. per lb.
(Price variance)
(Quantity variance)
(Total materials variance)
Alternate solution format
Price variance = AQ x (AP – SP)
Quantity variance = (AQ - SQ) x SP
Part 4 Direct labor variances
Preliminary computations
Actual hours used: 30,500 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
hours per hr. hours per hr. hours per hr.
(Rate variance)
(Efficiency variance)
(Total labor variance)
Alternate solution format
Rate variance = AH x (AR - SR)
Efficiency variance = (AH - SH) x SR
Part 5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Volume Variance
Expected production level 75% of capacity
Production level achieved 75% of capacity
Volume variance none
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials $ 45,000 $ 44,250 $ 750 F
Indirect labor 180,000 177,750 2,250 F
*F = Favorable variance; and U = Unfavorable variance.
Title: Problem 23-6AA
QA_Ori:
Part 1 Direct Materials Variances
Preliminary computations
Actual quantity of materials used: 138,000 lb. (given)
Direct materials cost variances
Actual units at actual cost [138,000 lbs. @ $3.75] $517,500
Direct Materials Price and Quantity Variances
Actual Cost
AQ x AP AQ x SP
Standard Cost
SQ x SP
138,000 x $3.75 138,000 x $4.00 135,000 x $4.00
lbs. per lb. lbs. per lb. lbs. per lb.
(Price variance)
(Quantity variance)
$22,500 F
(Total materials variance)
Alternate solution format
Price variance = AQ x (AP - SP)
Quantity variance = (AQ – SQ) x SP
Price variance $34,500 F
Part 2 Direct Labor Variances
Preliminary computations
Actual hours: 31,000 hrs. (given)
Direct labor cost variances
Actual units at actual cost [31,000 hrs. @ $15.10] $468,100
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR AH x SR
Standard Costs
SH x SR
hours per hr. hours per hr. hours per hr.
(Rate variance)
(Efficiency variance)
(Total labor variance)
Alternate solution format
Rate variance = AH x (AR - SR)
hour
Efficiency variance = (AH - SH) x SR
Rate variance $ 3,100 U
Part 3 Overhead Variances
(a) Variable overhead
Preliminary computations
Actual variable overhead (given):
Indirect materials $15,000
=$2.00/hr
Variable overhead cost variances
Variable Overhead Spending and Efficiency Variances
Actual Overhead
AH x AVR AH x SVR
Applied Overhead
SH x SVR
hours per hr. hours per hr.
(Spending variance)
(Efficiency variance)
(Total variable overhead variance)
(b) Fixed overhead
Preliminary computations
Actual fixed overhead (given):
Rent of factory building $15,000
Fixed overhead cost variances
Fixed Overhead Spending and Volume Variances
Actual Overhead Budgeted Overhead Fixed Overhead
Applied
hours per hr.
(Spending variance)
(Volume variance)
(Total fixed overhead variance)
Part 4
KEGLER COMPANY
Overhead Variance Report
For Month Ended May 31
Volume Variance
Expected production level 80% of capacity
Flexible Actual
Controllable Variance Budget Results Variances*
Variable overhead costs
Indirect materials $16,875 $15,000 $1,875 F
* F = Favorable variance; and U = Unfavorable variance.
Title: Problem 23-7AA
QA_Ori:
Part 1
Dec. 31* Goods in Process Inventory 100,000
Direct Materials Quantity Variance 3,000
Dec. 31 Goods in Process Inventory 95,800
Direct Labor Rate Variance 1,200
Dec. 31 Goods in Process Inventory 354,000
* 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 103,00
0
0
(2) Issuance of materials into production
0
Part 2
Under management by exception, the manager would first identify the largest
variances, attempt to uncover their causes, and then implement actions aimed at
correcting them. The smaller variances would be tackled after the major Title:
Problems were dealt with, if at all.
The largest variance amounts occur for the material quantity variance, the direct
labor efficiency variance, and the two overhead variances. The manager should
go to the production department to find out why the process used more materials
* The unfavorable volume variance indicates that the company produced
