EXERCISE 11-15
BURTE CORPORATION
Variance Report – Purchasing Department
For Week Ended January 9, 2014
Type of
Materials
Quantity
Purchased
Actual
Price
Standard
Price
Explanation
Rogue 11
Storm 17
Beast 29
25,000 lbs.
7,000 oz.
22,000 units.
$5.20
$3.45
$0.40
$5.00
$3.30
$0.42
Price increase
Rush order
Bought larger quantity
25,000 = $5,000/($5.20 – $5.00).
$1,050/7,000 = $0.15; $3.30 + $0.15 = $3.45
$440/22,000 = $0.02; $0.40 + $0.02 = $0.42
EXERCISE 11-16
FISK COMPANY
Income Statement
For the Month Ended January 31, 2014
Sales revenue (8,000 X $8) ……………………………………… $64,000
Cost of goods sold (8,000 X $5) ……………………………… 40,000
Gross profit (at standard) ………………………………………. 24,000
Variances
Materials price ……………………………………………….. $1,200 U
EXERCISE 11-17
1. Balanced scorecard—(c) An approach that incorporates financial and
2. Variance—(a) The difference between total actual costs and total stan-
dard costs.
3. Learning and growth perspective—(d) A viewpoint employed in the
its employees.
5. Customer perspective—(f) A viewpoint employed in the balanced
who buy its products or services.
6. Internal process perspective—(h) A viewpoint employed in the bal-
company’s value chain.
7. Ideal standards—(g) An optimum level of performance under perfect oper-
ating conditions.
8. Normal standards—(b) An efficient level of performance that is attainable
under expected operating conditions.
*EXERCISE 11-18
1. Raw Materials Inventory (18,000 X $4.40) ……………. 79,200
2. Work in Process Inventory (17,500 X $4.40) ……….. 77,000
3. Factory Labor (15,300 X $5.50)…………………………... 84,150
*EXERCISE 11-18 (Continued)
4. Work in Process Inventory (15,400 X $5.50) ………… 84,700
5. Work in Process Inventory ($84,700 X 100%) ………. 84,700
*EXERCISE 11-19
(a) $126,000 ($128,000 – $2,000).
(b) $129,000 ($126,000 + $3,000).
*EXERCISE 11-20
Raw Materials Inventory (1,900 X $2.50) ………………………. 4,750
Work in Process Inventory (1,880* X $2.50) …………………. 4,700
*235 X 8
Factory Labor (700 X $12) …………………………………………… 8,400
Work in Process Inventory (705* X $12) ………………………. 8,460
*235 X 3
*EXERCISE 11-21
(a)
Item
Amount
Hours
Rate
Variable overhead ……………………………..
Fixed overhead …………………………………
Total overhead ………………………………….
$34,650
19,800
$54,450
16,500
16,500
16,500
$2.10
1.20
$3.30
(b) Total overhead variance:
Actual Overhead
$55,000
–
–
Overhead Applied
$52,800
(16,000* X $3.30)
=
$2,200 U
*4,000 X 4 hrs. = 16,000 hrs.
Overhead controllable variance:
Actual Overhead
$55,000
–
–
Overhead Budgeted
$53,400
[(16,000 X $2.10) + $19,800]
=
$1,600 U
Overhead volume variance:
Fixed Overhead
Rate
$1.20
X
X
Normal Capacity
Hours
[(16,500
–
–
Standard Hours
Allowed
(4,000 X 4)]
=
$600 U
inefficiency in controlling variable overhead costs.
The overhead volume variance relates to fixed overhead costs. This
*EXERCISE 11-22
(a)
1.
Total actual overhead cost
=
Overhead
Budgeted +
Overhead
Controllable
Variance
=
($18,000 + $12,600) + $1,200
=
$31,800
2.
Actual variable overhead cost
=
Actual Overhead – Fixed Overhead
=
$31,800 – $12,600
=
$19,200
3.
Variable overhead cost applied
=
2,000 hours X $9 = $18,000
4.
Fixed overhead cost applied
=
2,000 hours X $6 = $12,000
5.
Overhead volume variance
=
Fixed
Overhead
Rate
X
Normal Standard
Capacity –Hours
Hours Allowed
=
$6 X (2,100* – 2,000)
=
$600 U
*$12,600 ÷ $6 per hour = 2,100 hours
(b)
Number of loans processed
=
Standard hours allowed ÷
Standard hours per application
=
2,000 ÷ 2
=
1,000 loans processed
EXERCISE 11-23
(a)
(Actual)
($19,000)
–
–
(Applied)
(1,800 X $10*)
=
=
Total Overhead Variance
$1,000 U
(Actual)
($19,000)
–
–
(Budgeted)
($17,600)
=
=
Overhead Controllable Variance
$1,400 U
Fixed OH
Rate
$3**
Normal
X Capacity
(1,667***
–
–
Standard Hours
Allowed
1,800)
=
=
Overhead Volume
Variance
$400 F
*$200,000/20,000 **($5,000 X 12)/20,000 ***20,000/12
(b) The cause of an unfavorable controllable variance could be higher than
expected use of indirect materials, indirect labor, and factory supplies, or
SOLUTIONS TO PROBLEMS
PROBLEM 11-1A
(a) Total materials variance:
( AQ X AP )
(5,100 X $7.20)
$36,720
–
–
( SQ X SP )
(4,900 X $7.00)
$34,300
=
$2,420 U
Materials price variance:
( AQ X AP )
(5,100 X $7.20)
$36,720
–
–
( AQ X SP )
(5,100 X $7.00)
$35,700
=
$1,020 U
Materials quantity variance:
( AQ X SP )
(5,100 X $7.00)
$35,700
–
–
( SQ X SP )
(4,900 X $7.00)
$34,300
=
$1,400 U
Total labor variance:
( AH X AR )
(7,500 X $12.50)
$93,750
–
–
( SH X SR )
(7,840* X $12.00)
$94,080
=
$330 F
*4,900 X 1.6
Labor price variance:
( AH X AR )
(7,500 X $12.50)
$93,750
–
–
( AH X SR )
(7,500 X $12.00)
$90,000
=
$3,750 U
Labor quantity variance:
( AH X SR )
(7,500 X $12.00)
$90,000
–
–
( SH X SR )
(7,840 X $12.00)
$94,080
=
$4,080 F
(b) Total overhead variance:
Actual
Overhead
($59,700 + $21,000)
$80,700
–
–
Overhead
Applied
(7,840 X $10.00)
$78,400
=
$2,300 U
PROBLEM 11-2A
(a) 1. Total materials variance:
( AQ X AP )
(10,600 X $2.25)
$23,850
–
–
( SQ X SP )
(10,000 X $2.10)
$21,000
=
$2,850 U
Materials price variance:
( AQ X AP )
(10,600 X $2.25)
$23,850
–
–
( AQ X SP )
(10,600 X $2.10)
$22,260
=
$1,590 U
Materials quantity variance:
( AQ X SP )
(10,600 X $2.10)
$22,260
–
–
( SQ X SP )
(10,000 X $2.10)
$21,000
=
$1,260 U
2. Total labor variance:
( AH X AR )
(14,400 X $8.40*)
$120,960
–
–
( SH X SR )
(15,000 X $8.00**)
$120,000
=
$960 U
*$120,960 ÷ 14,400 **$120,000 ÷ 15,000
Labor price variance:
( AH X AR )
(14,400 X $8.40)
$120,960
–
–
( AH X SR )
(14,400 X $8.00)
$115,200
=
$5,760 U
Labor quantity variance:
( AH X SR )
(14,400 X $8.00)
$115,200
–
–
( SH X SR )
(15,000 X $8.00)
$120,000
=
$4,800 F
(b) Total overhead variance:
Actual
Overhead
$189,500
–
–
Overhead
Applied
$193,500
(45,000* X $4.30)
=
$4,000 F
*15,000 X 3
PROBLEM 11-2A (Continued)
(c) AYALA CORPORATION
Income Statement
For the Month Ended June 30, 2014
Sales revenue ……………………………………………. $400,000
Cost of goods sold (at standard) …………………. 334,500*
Gross profit (at standard) ……………………………. 65,500
Variances
Materials price …………………………………….. $ 1,590 U
Materials quantity ………………………………… 1,260 U
PROBLEM 11-3A
(a) 1. Total materials variance:
( AQ X AP )
(90,500 X $4.15)
$375,575
–
–
( SQ X SP )
(89,600* X $4.40)
$394,240
=
$18,665 F
( AQ X SP )
$200,220
$190,280
=