208 Chapter 7
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FOH Spending Variance
100
Cost of Goods Sold
2,980
VOH Spending Variance
1,680
VOH Efficiency Variance
640
FOH Volume Variance
760
To close OH variances for March
tion managers.
55. (The items marked with an * were given.)
Actual Labor Cost
Budget Labor Cost
SR × AH
SR × SH
$12 × 9,000
$12 × 8,000*
$112,500
$108,000
$96,000
$4,500 U*
$12,000 U*
Labor Rate Variance
Labor Efficiency Variance
hours below are in thousands.)
Actual Overhead
Budget at Actual
Labor Hours
Budget at Standard
Labor Hours
Applied Overhead
VOH
$162,000*
($16 × 9k)
= $144,000
($16 × 8k)
= $128,000
($16 × 8k)
= $128,000
FOH
84,000*
90,000
90,000
($9 × 8k)
72,000
$246,000
$234,000
$218,000
$200,000
$12,000 U
$16,000 U
$18,000 U
Spending Variance
Efficiency Variance
Volume Variance
a. Number of units manufactured = 8,000 ÷ 4 = 2,000
b. Total applied overhead = $200,000
56. a. Actual OH ($265,400 + $177,250)
$442,650
Applied OH ($15 × 31,000)
465,000
Total OH variance
$ 22,350 F
b. Budgeted FOH = $6 × 30,000 = $180,000
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Actual
Budget at Output
Applied
VOH
$265,400
$9 × 31,000
= $279,000
FOH
177,250
180,000
$442,650
$459,000
$15 × 31,000 = $465,000
$16,350 F
$6,000 F
Budget Variance
Volume Variance
$22,350 F
Total OH Variance
the one- and two-variance approaches, $22,350 F.
Actual
Budget at Input
Budget at Output
VOH
$265,400
$9 × 33,300
= $299,700
$9 × 31,000
= $279,000
FOH
177,250
180,000
180,000
$442,650
$479,700
$459,000
$37,050 F
$20,700 U
Total OH Spending Variance
VOH Efficiency Variance
57. a. Standard MHs = 3,360 × 1.25 = 4,200 MHs
Actual VOH
Budgeted VOH
Applied VOH
$27,000
$6.50 × 4,100 = $26,650
$6.50 × 4,200 = $27,300
$350 U
$650 F
VOH Spending Variance
VOH Efficiency Variance
$300 F
Total VOH Variance
Monthly budgeted FOH = 4,000 MHs × $9.35 = $37,400
Actual FOH
Budgeted FOH
Applied FOH
$41,400
$37,400
$9.35 × 4,200 = $39,270
$4,000 U
$1,870 F
FOH Spending Variance
Volume Variance
$2,130 U
Total VOH Variance
b. Actual OH
Budget at Input
Budget at Output
Applied
VOH $27,000 $6.50 × 4,100 = $26,650 $6.50 × 4,200 = $27,300
$27,300
FOH 41,400
37,400
37,400
39,270
$68,400
$64,050
$64,700
$66,570
$4,350 U
$650 F
$1,870 F
OH Spending Var.
OH Efficiency Variance
Volume Var.
$1,830 U
Total OH Variance
210 Chapter 7
c. Actual OH
Budget at Output
Applied
VOH $27,000
$6.50 × 4,200 = $27,300
$27,300
FOH 41,400
37,400
39,270
$68,400
$64,700
$66,570
$3,700 U
$1,870 F
OH Budget Variance
Volume Variance
$1,830 U
Total OH Variance
d. Actual OH
Applied OH
VOH $27,000
$27,300
FOH 41,400
39,270
$68,400
$66,570
$1,830 U
Total OH Variance
58. a. Material price variance:
Aluminum: AQp × (AP – SP) = 4,000 × ($3.80 – $4.00) =
$ 800 F
Copper: AQp × (AP – SP) = 3,000 × ($8.40 – $8.00) =
1,200 U
Total
$ 400 U
b. Material usage variance
Standard quantity of aluminum = 850 × 4 = 3,400
Standard quantity of copper = 850 × 3 = 2,550
Aluminum: SP × (AQu – SQ) = $4 × (3,500 – 3,400) =
$400 U
Copper: SP × (AQu – SQ) = $8 × (2,600 – 2,550) =
400 U
Total
$800 U
c. Total actual labor cost = ($16 × 5,200) + ($17.00 × 900)
d. Standard hours = 850 × 7 = 5,950
Labor efficiency variance = (SR × AH) – (SR × SH)
= $23,300 – ($6 × 4,175)
f. VOH efficiency variance = (Budget at actual hours) – (Budget at SHs)
Chapter 7 211
g. Budgeted FOH = 6,000 MHs × $4 = $24,000
h. FOH volume variance = Budgeted FOH – Applied FOH
i. Budget variance = Actual OH – (Budgeted OH at standard hrs.)
Or
Budget variance = VOH spending + VOH efficiency + FOH spending
Aluminum Material Inventory 16,000
Aluminum Material Price Variance 800
Accounts Payable 25,200
Work in Process Inventory 13,600
Aluminum Material Quantity Variance 400
Work in Process 95,200
Labor Rate Variance 900
Work in Process 17,000
212 Chapter 7
59. a.
Actual
SP × AQ
SP × SQ
$18 × 450
$18 × (6,000 ÷ 12)
$8,300
$8,100
$9,000
$200 U
$900 F
Material Price Variance
Material Quantity Variance
$700 F
Total Material Variance
b.
Actual
SR × AH
SH × SR
$8 × 1,475
$8 × (6,000 ÷ 4)
$12,242.50
$11,800
$12,000
$442.50 U
$200 F
Labor Rate Variance
Labor Efficiency Variance
$242.50 U
Total Labor Variance
c.
Actual VOH
SR × AQ
SR × SQ
$2.40 × 1,475
$2.40 × 1,500
$3,480
$3,540
$3,600
$60 F
$60 F
VOH Spending Variance
VOH Efficiency Variance
$120 F
Total VOH Variance
Actual FOH
Budget
SR × SH
$1.25 × 6,000
$7,720
$7,500
$7,500
$220 U
$0
FOH Spending Variance
Volume Variance
$220 U
Total FOH Variance
d.
Actual
Budget @ Input
Budget @ Output
Applied
VOH $ 3,480
$ 3,540
$ 3,600
$ 3,600
FOH 7,720
7,500
7,500
7,500
$11,200
$11,040
$11,100
$11,100
$160 U
$60 F
$0
OH Spending Var.
OH Efficiency Var.
Volume Variance
e.
Actual
Budget
Applied
VOH $ 3,480
$ 3,600
$ 3,600
FOH 7,720
7,500
7,500
$11,200
$11,100
$11,100
$100 U
$0
Budget Variance
Volume Variance
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f.
Actual
Applied
VOH $ 3,480
$ 3,600
FOH 7,720
7,500
$11,200
$11,100
$100 U
Underapplied OH
OH spending variance
$160 U
OH efficiency variance
60 F
Budget variance
$100 U
Volume variance
0 U
Total OH variance
$100 U
g. Cost drivers: number of jobs worked per month; distance from job site to busi-
60. a. Material price variance
$23,400 U
Material quantity variance
24,900 F
Labor rate variance
5,250 F
Labor efficiency variance
36,900 U
VOH spending variance
3,000 U
VOH efficiency variance
1,800 F
FOH spending variance
6,600 F
FOH volume variance
16,800 U
Total
$41,550 U
Material Quantity Variance
24,900
Labor Rate Variance
5,250
Cost of Goods Sold
30,150
Material Price Variance
23,400
Labor Efficiency Variance
36,900
VOH Efficiency Variance
1,800
VOH Control
1,200
VOH Spending Variance
3,000
Cost of Goods Sold
1,200
VOH Control
1,200
FOH Spending Variance
6,600
FOH Control
10,200
FOH Volume Variance
16,800
Cost of Goods Sold
10,200
FOH Control
10,200
214 Chapter 7
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b. Original balance of CGS
$2,702,200
Add net unfavorable variances
41,550
Adjusted balance of CGS
$2,743,750
c. Material price variance allocation:
Total
Percent
Raw Material Inventory
$ 320,600
7
Work in Process Inventory
916,000
20
Finished Goods Inventory
641,200
14
Cost of Goods Sold
2,702,200
59
Total
$4,580,000
100
Allocation of material price variance:
Raw Material Inventory ($23,400 × 0.07)
$ 1,638
Work in Process Inventory ($23,400 × 0.20)
4,680
Finished Goods Inventory ($23,400 × 0.14)
3,276
Cost of Goods Sold ($23,400 × 0.59)
13,806
Total
$23,400
Raw Material Inventory
1,638.00
Work in Process Inventory
4,680.00
Finished Goods Inventory
3,276.00
Cost of Goods Sold
13,806.00
Material Price Variance
23,400.00
To allocate material price variance to
appropriate accounts
Allocation of all other variances = ($41,550 – $23,400) = $18,150
Total
Percent*
Work in Process Inventory
$ 916,000
22
Finished Goods Inventory
641,200
15
Cost of Goods Sold
2,702,200
63
Total
$4,259,400
100
*rounded
Allocation:
Work in Process Inventory ($18,150 × 0.22)
$ 3,993.00
Finished Goods Inventory ($18,150 × 0.15)
2,722.50
Cost of Goods Sold ($18,150 × 0.63)
11,434.50
Total
$18,150.00
VOH Efficiency Variance
1,800.00
VOH Control
1,200.00
VOH Spending Variance
3,000.00
FOH Spending Variance
6,600.00
FOH Control
10,200.00
FOH Volume Variance
16,800.00
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Work in Process Inventory
3,993.00
Finished Goods Inventory
2,722.50
Cost of Goods Sold
11,434.50
Material Quantity Variance
24,900.00
Labor Rate Variance
5,250.00
Labor Efficiency Variance
36,900.00
VOH Control
1,200.00
FOH Control
10,200.00
To allocate remaining variance to
appropriate accounts
d. Raw Material Inventory ($320,600.00 + $1,638.00)
$ 322,238.00
Work in Process Inventory ($916,000.00 + $4,680.00 +
$3,993.00)
924,673.00
Finished Goods Inventory ($641,200.00 + $3,276.00 +
$2,722.50)
647,198.50
Cost of Goods Sold ($2,702,200.00 + $13,806.00 +
$11,434.50)
2,727,440.50
Note that the total difference in Cost of Goods Sold from (b) and (d) is
61. a. (1) Material quantity purchased
15,600
sq. ft.
Unfavorable unit price ($2.00 – $2.10)
$0.10
Unfavorable purchase price variance
$ 1,560
(2) Material quantity used
15,900
sq. ft.
Material quantity required at standard for 15,000
units (15,000 × 1 sq. ft.)
15,000
sq. ft.
Unfavorable quantity
900
sq. ft.
Standard price per sq. ft.
$2
Unfavorable material quantity variance
$1,800
(3) Direct labor used
24,600
hrs.
Unfavorable hourly rate ($9.00 – $9.10)
$0.10
Unfavorable labor rate variance
$ 2,460
(4) Direct labor used
24,600
hrs.
Direct labor required at standard for 15,000 units
(15,000 × 1.6 hrs.)
24,000
hrs.
Unfavorable direct labor usage
600
hrs.
Standard wage rate per hour
$9
Unfavorable labor efficiency variance
$5,400
(5) The OH included in the standard unit cost is related to DLHs.
The OH budget is based on output.