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Problem 8-21B (continued)
2. The computations to follow will require the standard quantities allowed
for the actual output for each material.
Standard Quantity Allowed
Material X342:
Production of Alpha8 (1.5 kilos per unit × 1,200 units) ......
1,800 kilos
Production of Zeta9 (2.7 kilos per unit × 1,700 units) ........
4,590 kilos
Total ..............................................................................
6,390 kilos
Material Y561:
Production of Alpha8 (2.3 liters per unit × 1,200 units) .....
2,760 liters
Production of Zeta9 (4.3 liters per unit × 1,700 units) .......
7,310 liters
Total ..............................................................................
10,070 liters
Direct Materials Variances—Material X342:
Materials quantity variance = SP (AQ – SQ)
= $3.40 per kilo (8,800 kilos – 6,390 kilos)
= $8,194 U
Materials price variance = AQ (AP – SP)
= 13,000 kilos ($3.60 per kilo* – $3.40 per kilo)
= $2,600 U
**$46,800 ÷ 13,000 kilos = $3.60 per kilo
Direct Materials Variances—Material Y561:
Materials quantity variance = SP (AQ – SQ)
= $1.5 per liter (14,000 liters – 10,070 liters)
= $5,895 U
Materials price variance = AQ (AP – SP)
= 18,000 liters ($1.40 per liter* – $1.50 per liter)
= $1,800 F
*$25,200 ÷ 18,000 liters = $1.40 per liter
Problem 8-21B (continued)
3. The computations to follow will require the standard quantities allowed
for the actual output for direct labor in each department.
Standard Hours Allowed
Sintering:
Production of Alpha8 (0.20 hours per unit × 1,200 units) ..
240 hours
Production of Zeta9 (0.35 hours per unit × 1,700 units) ....
595 hours
Total ..............................................................................
835 hours
Finishing:
Production of Alpha8 (0.75 hours per unit × 1,200 units) ..
900 hours
Production of Zeta9 (0.85 hours per unit × 1,700 units) ....
1,445 hours
Total ..............................................................................
2,345 hours
Problem 8-22B (45 minutes)
1. The standard quantity of plates allowed for tests performed during the
month would be:
Smears .................................
3,400
Blood tests ............................
1,000
Total .....................................
4,400
Plates per test .......................
× 3
Standard quantity allowed ......
13,200
The variance analysis for plates would be:
Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ × SP)
Actual Quantity
of Input,
at Standard Price
(AQ × SP)
Actual Quantity
of Input,
at Actual Price
(AQ × AP)
13,200 plates ×
$3.25 per plate
= $42,900
14,600 plates ×
$3.25 per plate
= $47,450
$53,040
Materials quantity
variance = $4,550 U
17,000 plates ×
$3.25 per plate
= $55,250
Materials price variance
= $2,210 F
Problem 8-22B (continued)
2. a. The standard hours allowed for tests performed during the month
would be:
Smears: 0.4 hour per test × 3,400 tests .....
1,360
Blood tests: 0.8 hour per test × 1,000
tests ......................................................
800
Total standard hours allowed ......................
2,160
The variance analysis of labor would be:
Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH × SR)
Actual Hours of Input,
at Standard Rate
(AH × SR)
Actual Hours of Input,
at Actual Rate
(AH × AR)
2,160 hours ×
$11.60 per hour
= $25,056
2,400 hours ×
$11.60 per hour
= $27,840
= $26,400
Labor efficiency variance
= $2,784 U
Labor rate variance
= $1,440 F
Spending Variance = $1,344 U
Alternatively, the variances can be computed using the formulas:
Labor efficiency variance = SR (AH – SH)
= $11.60 per hour (2,400 hours – 2,160 hours)
= $2,784 U
Labor rate variance = AH (AR – SR)
= 2,400 hours ($11.00 per hour* – $11.60 per hour)
= $1,440 F
*$26,400 ÷ 2,400 hours = $11.00 per hour
Problem 8-22B (continued)
2. b. The policy probably should not be continued. Although the hospital is
saving $0.60 per hour by employing more assistants relative to the
3. The variable overhead variances follow:
Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH × SR)
Actual Hours of Input,
at Standard Rate
(AH × SR)
Actual Hours of Input,
at Actual Rate
(AH × AR)
2,160 hours ×
$7.50 per hour
= $16,200
2,400 hours ×
$7.50 per hour
= $18,000
$19,200
Variable overhead
efficiency variance
= $1,800 U
Variable overhead
rate variance
= $1,200 U
Spending variance = $3,000 U
Alternatively, the variances can be computed using the formulas:
Variable overhead efficiency variance = SR (AH – SH)
= $7.50 per hour (2,400 hours – 2,160 hours)
= $1,800 U
Variable overhead rate variance = AH (AR – SR)
= 2,400 hours ($8.00 per hour* – $7.50 per hour)
= $1,200 U
*$19,200 ÷ 2,400 hours = $8.00 per hour
Yes, the two variances are related. Both are computed by comparing
actual labor time to the standard hours allowed for the output of the
period. Thus, if there is an unfavorable labor efficiency variance, there
Problem 8-23B(20 minutes)
1. The flexible budget is shown below:
OpenDoor Corporation
Flexible Budget
For the Month Ended April 30
Flexible
Budget
Machine-hours (q) ..........................
17,000
Utilities ($16,800 + $0.18q) ............
$ 19,860
Maintenance ($38,700 + $2.00q) ....
72,700
Supplies ($0.50q) ...........................
8,500
Indirect labor ($94,300 + $1.60q) ...
121,500
Depreciation ($67,600) ...................
67,600
Total ..............................................
$290,160
Problem 8-23B (continued)
2. The spending variances are computed below:
OpenDoor Corporation
Spending Variances
For the Month Ended April 30
Flexible
Budget
Actual
Results
Spending
Variances
Machine-hours (q) ..........................
17,000
17,000
Utilities ($16,800 + $0.18q) ............
$ 19,860
$ 22,020
$2,160
U
Maintenance ($38,700 + $2.00q) ....
72,700
70,500
2,200
F
Supplies ($0.50q) ...........................
8,500
9,300
800
U
Indirect labor ($94,300 + $1.60q) ...
121,500
125,600
4,100
U
Depreciation ($67,600) ...................
67,600
69,300
1,700
U
Total ..............................................
$290,160
$296,720
$6,560
U
Problem 8-24B (45 minutes)
1.
Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ × SP)
Actual Quantity of
Input,
at Standard Price
(AQ × SP)
Actual Quantity of
Input,
at Actual Price
(AQ × AP)
12,000 yards** ×
$6.30 per yard*
= $75,600
12,400 yards ×
$6.30 per yard* =
$78,120
$74,400
Materials quantity
variance = $2,520 U
Materials price
variance = $3,720 F
Spending variance = $1,200 F
*
*$18.90 ÷ 3.0 yards = $6.3 per yard
**
4,000 units × 3.0 yards per unit = 12,000 yards
Alternatively, the variances can be computed using the formulas:
Problem 8-24B (continued)
2. Many students will miss parts 2 and 3 because they will try to use
product
costs as if they were
hourly
costs. Pay particular attention to the
computation of the standard direct labor time per unit and the standard
Problem 8-24B (continued)
3.
Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH × SR)
Actual Hours of Input,
at Standard Rate
(AH × SR)
Actual Hours of Input,
at Actual Rate
(AH × AR)
800 hours ×
$3.00 per hour*
= $2,400
750 hours ×
$3.00 per hour*
= $2,250
$8,000
Variable overhead
efficiency variance
= $150 F
Variable overhead
rate variance
= $5,750 U
Spending variance = $5,600 U
*
*$.60 standard cost per robe ÷ .20 standard hours = $3.00
standard rate per hour
Alternatively, the variances can be computed using the formulas:
Variable overhead efficiency variance = SR (AH – SH)
= $3.00 per hour (750 hours – 800 hours)
= $150 F
Variable overhead rate variance = AH (AR – SR)
= 750 hours ($10.67 per hour* – $3.00 per hour)
= $5,750 U
*$8,000 ÷ 750 hours = $10.67 per hour (rounded)
Problem 8-25B (45 minutes)
1. a. Materials price variance = AQ (AP – SP)
6,200 pounds ($2.75 per pound* – SP) = $1,550 F**
$17,050 – 6,200 pounds × SP = $1,550***
6,200 pounds × SP = $18,600
SP = $3.00 per pound
*
$17,050 ÷ 6,200 pounds = $2.75 per pound
**
$1,200 U + ? = $350 F; $1,200 U – $350 F = $1,550 F
***
When used with the formula, unfavorable variances are
positive and favorable variances are negative.
b. Materials quantity variance = SP (AQ – SQ)
$3.00 per pound (6,200 pounds – SQ) = $1,200 U
$18,600 – $3.00 per pound × SQ = $1,200*
$3.00 per pound × SQ = $17,400
SQ = 5,800 pounds
*
When used with the formula, unfavorable variances are
positive and favorable variances are negative.
Alternative approach to parts (a) and (b):
Standard Quantity Allowed
for Actual Output,
at Standard Price
(SQ × SP)
Actual Quantity of
Input,
at Standard Price
(AQ × SP)
Actual Quantity of
Input,
at Actual Price
(AQ × AP)
5,800 pounds ×
$3.00 per pound
= $17,400
6,200 pounds* ×
$3.00 per pound
= $18,600
= $17,050*
Materials quantity
variance = $1,200 U*
Materials price
variance = $1,550 F
Spending variance = $350 F*
*Given.
c. 5,800 pounds ÷ 1,300 units = 4.46 pounds per unit.
Problem 8-25B (continued)
2. a. Labor efficiency variance = SR (AH – SH)
$8.50 per hour (AH – 2,730 hours*) = $4,250 F
$8.50 per hour × AH – $23,205 = –$4,250**
$8.50 per hour × AH = $18,955
