Ex. 24.6
(continued) c.
Ex. 24.7 a.
b.
c.
Extended hours worked during the period may have resulted in an
increased average wage rate due to overtime wage premiums. This may
Standard price, $6.80 per pound
$6.80/lb.
Standard price, $6.80 per pound
The materials quantity variance is found by multiplying the standard
materials price by the difference between the standard quantity of
materials and the actual quantity used. The standard price of materials,
$6.80/lb., was determined in part a, above.
Actual quantity of materials used, 4,000 pounds
In computing the materials quantity variance, the actual quantity of
Ex. 24.8
(continued) b.
Ex. 24.9
$ 360,000
75,000
One explanation of the variances is that higher skilled workers were hired at
wages greater than the budgeted rate. The higher skilled workers may have
Overhead spending variance:
Fixed ………………………………………………
…
Variable ($3 per unit × 25,000 units) ……………
…
Overhead budgeted for actual production (25,000 units):
Ex. 24.11
(continued)
Ex. 24.12
Overhead rate per unit = $10 per labor hr. × 2 labor hours per unit = $20 per unit
Overhead applied = 4,500 actual production units × $20 per unit = $90,000
Volume variance = $90,000 $94,000 (from part a) = $4,000 Unfavorable
unfavorable volume variance, reflecting that actual production was less than
budgeted production. The overhead spending variance was favorable, due to fixed
costs that were $2,000 lower than expected ($40,000 $38,000) and variable costs
that were $1,000 higher than allowed at the actual production level ($54,000
$55,000). Zeta’s manager may want to investigate why the variable overhead costs
per unit were higher than expected and determine if it is linked to the lower fixed
costs. As long as Zeta is meeting its sales demand, the unfavorable volume variance
may not require any corrective action.
The entry to close McGill’s unfavorable overhead spending variance required that the
variance account be credited for $600. Given that the Cost of Goods Sold account was
Ex. 24.14 a. A favorable materials price variance results from the purchasing department being
able to acquire direct materials at a price below standard cost. This may result from
finding a lower price supplier or from obtaining discounts for quantity purchases.
The manager of the purchasing department (purchasing agent) is responsible for
use of materials and is responsible for the materials quantity variance. If, however,
Ex. 24.15
Several items from the Store Sales and Other Data section of Home Depot’s 5-Year
Summary could be used to create direct labor standards. For example, weighted average
sales per store per employee, number of customer transactions per employee, and
average ticket price per employee are three that seem obvious. Below are suggestions or
25 Minutes, Strong PROBLEM 24.1A
a. MPV =
=
=
= 20 (Standard Quantity) – 16,000
= 20 (Standard Quantity)
= (Standard Quantity) = 760 pounds for 760 units.
780 units × 1.00 pound per unit = 780 pounds, standard quality of materials allowed for
Thus, we may solve for the Standard Quantity as follows:
15,200 ÷ 20
-800
760 pounds divided by 760 units = 1.00 pound per unit.
$1,600 (or $1,600 Unfavorable)
15,200
SOLUTIONS TO PROBLEMS SET A
Actual Quantity × (Standard Price – Actual Price)
800 pounds × ($20/lb – $22/lb)
BRADLE
Y
PROBLEM 24.2
A
A
GRICHEM INDUSTRIES
a.
MPV =
30 Minutes, Medium
Computation of materials price variance (MPV):
Actual Quantity Used × (Standard Price – Actual Price)
PROBLEM 24.2A
AGRICHEM INDUSTRIES (concluded)
Computation of overhead spending variance:
Overhead budgeted for 200 batches:
Fixed 50,000$
V
ariable (200 batches × $25 per batch) 5,000
Total budgeted overhead 55,000$
Less: Actual overhead for the month 54,525
Overhead spending variance (favorable
)
475$
Computation of volume variance:
Overhead applied at standard cost ($225 × 200 batches) 45,000$
Less: Budgeted overhead (above) 55,000
V
olume variance (unfavorable) (10,000)$
b. General Journal
Jan. 31 Work in Process Inventory (at standard) 60,000
Materials Quantity Variance 1,500
Standard cost (200 batches × $300) = $60,000
Actual cost = $58,42
5
To record direct labor cost applicable to Januar
y
production:
Standard cost (200 batches × $175) = $35,000
Actual cost = $32,300
To apply overhead to work in process, using standard
unit cost:
5
25 Minutes, Medium PROBLEM 24.3A
AMERICAN HARDWOOD PRODUCTS
General Journal
a. (1) Work in Process (standard cost) 90,000
Materials Quantity Variance 8,400
(2) Work in Process (standard cost) 84,000
Labor Efficiency Variance 1,500
(3) Work in Process (standard cost) 115,500
Overhead Spending Variance 3,240
Overhead Volume Variance 4,500
(2) Cost of Goods Sold (at standard cost) 264,000
Finished Goods Inventory (at standard cost) 264,000
a. =
=
=
=
=
=
b. =
=
=
$29,690 Favorable
*Actual Price per Pound = $593,800/148,450 pounds = $4.00/pound
Materials Quantity Variance
$1,100 Favorable
Standard Price × (Standard Quantity – Actual
Quantity)
$4.20 per pound × (149,940 pounds* – 148,450 pounds)
$6,258 Favorable
*Standard Quantity Allowed = 147 batches × 1,020 pounds/batch = 149,940 pounds
Labor Rate Variance Actual Labor Hours × (Standard Rate – Actual Rate)
2,200 hours × ($8.50 – $8.00*)
45 Minutes, Strong
Materials Price Variance Actual Quantity Used × (Standard Price – Actual Price)
148,450 pounds × ($4.20 – $4.00*)
PROBLEM 24.4A
SVEN ENTERPRISES
c.
Overhead
Costs Applied
Costs Allowed
Actual Overhead
Costs Incurred
Problem 24.4A
SVEN ENTERPRISES (continued)
Overhead variances:
Standard Overhead