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Solutions Manual, Chapter 11 1
Chapter 11
Standard Costs and Variances
Solutions to Questions
11-1 A quantity standard indicates how much
11-2 Separating an overall variance into a
11-3 The materials price variance is usually
11-4 The materials price variance can be
computed either when materials are purchased
11-5 This combination of variances may
used to find someone to blame for problems.
labor rate variance. For example, skilled workers
variance. Or unskilled or untrained workers can
be assigned to tasks that should be filled by
11-8 If poor quality materials create
11-9 If overhead is applied on the basis of
direct labor-hours, then the variable overhead
rate, differs between the two variances.
produce at capacity, the bottleneck will be
2 Managerial Accounting for Managers, 4th Edition
inventory will build up in front of the
workstations with the least capacity.
Solutions Manual, Chapter 11 3
The Foundational 15
for cost variances as follows:
Actual Quantity of
Input,
at Actual Price
(AQ × AP)
Actual Quantity of
Input,
at Standard Price
(AQ × SP)
Standard Quantity
Allowed
for Actual Output,
at Standard Price
(SQ × SP)
160,000 pounds ×
$7.50 per pound
= $1,200,000
160,000 pounds ×
$8.00 per pound
= $1,280,000
150,000 pounds* ×
$8.00 per pound
= $1,200,000
Materials price
variance = $80,000 F
Materials quantity
variance = $80,000 U
Spending variance = $0
*30,000 units × 5 pounds per unit = 150,000 pounds
Materials price variance = AQ (AP – SP)
= $80,000 U
The Foundational 15 (continued)
5. and 6.
The materials price variance ($85,000 F) and the materials quantity
variance ($80,000 U) can be computed as follows:
Actual Quantity
of Input,
at Actual Price
(AQ × AP)
Actual Quantity
of Input,
at Standard Price
(AQ × SP)
Standard Quantity
Allowed for Actual
Output,
at Standard Price
(SQ × SP)
170,000 pounds ×
$7.50 per pound
= $1,275,000
170,000 pounds ×
$8.00 per pound
= $1,360,000
150,000 pounds* ×
$8.00 per pound
= $1,200,000
Materials price variance
= $85,000 F
160,000 pounds ×
$8.00 per pound
= $1,280,000
Materials quantity
variance = $80,000 U
*30,000 units × 5 pounds per unit = 150,000 units
Alternatively, the variances can be computed using the formulas:
Solutions Manual, Chapter 11 5
The Foundational 15 (continued)
7. The direct labor cost included in the planning budget is $700,000 (=
The direct labor cost included in the flexible budget (SH × SR = $840,000),
Alternatively, the variances can be computed using the formulas:
6 Managerial Accounting for Managers, 4th Edition
The Foundational 15 (continued)
12. The variable manufacturing overhead cost included in the planning
The variable overhead cost included in the flexible budget (SH × SR =
$300,000), the variable overhead rate variance ($55,000 U), and the
variable overhead efficiency variance ($25,000 F) can be computed using
the general model for cost variances as follows:
Actual Hours of Input,
at Actual Rate
(AH × AR)
Actual Hours of Input,
at Standard Rate
(AH × SR)
Standard Hours Allowed
for Actual Output,
at Standard Rate
(SH × SR)
55,000 hours ×
$5.10 per hour**
= $280,500
55,000 hours ×
$5.00 per hour
= $275,000
60,000 hours* ×
$5.00 per hour
= $300,000
Variable overhead rate
variance = $5,500 U
Variable overhead
efficiency variance
= $25,000 F
Spending variance = $19,500 F
*30,000 units × 2.0 hours per unit = 60,000 hours
** $280,500 ÷ 55,000 hours = $5.10 per hour
Alternatively, the variances can be computed using the formulas:
Variable overhead efficiency variance = SR (AH – SH)
Solutions Manual, Chapter 11 7
Exercise 11-1 (20 minutes)
1.
Number of helmets ...........................................
35,000
Standard kilograms of plastic per helmet ............
× 0.6
Total standard kilograms allowed .......................
21,000
Standard cost per kilogram ................................
× $8
Total standard cost ...........................................
$168,000
Actual cost incurred (given) ...............................
$171,000
Total standard cost (above) ...............................
168,000
Total material variance—unfavorable ..................
$ 3,000
2.
Actual Quantity
of Input, at
Actual Price
Actual Quantity of Input,
at Standard Price
Standard Quantity
Allowed for Output, at
Standard Price
(AQ × AP)
(AQ × SP)
(SQ × SP)
22,500 kilograms ×
21,000 kilograms* ×
$8 per kilogram
$8 per kilogram
$171,000
= $180,000
= $168,000
Price Variance,
$9,000 F
Quantity Variance,
$12,000 U
Spending Variance,
$3,000 U
Alternatively, the variances can be computed using the formulas:
8 Managerial Accounting for Managers, 4th Edition
Exercise 11-2 (20 minutes)
1.
Number of meals prepared ...................
4,000
Standard direct labor-hours per meal ....
× 0.25
Total direct labor-hours allowed ............
1,000
Standard direct labor cost per hour .......
× $9.75
Total standard direct labor cost .............
$9,750
Actual cost incurred ..............................
$9,600
Total standard direct labor cost (above)
9,750
Total direct labor variance ....................
$ 150
Favorable
2.
Actual Hours of
Input, at the
Actual Rate
Actual Hours of Input,
at the Standard Rate
Standard Hours
Allowed for Output, at
the Standard Rate
(AH×AR)
(AH×SR)
(SH×SR)
960 hours ×
$10.00 per hour
960 hours ×
$9.75 per hour
1,000 hours ×
$9.75 per hour
= $9,600
= $9,360
= $9,750
Rate Variance,
$240 U
Efficiency Variance,
$390 F
Spending Variance,
$150 F
Labor rate variance = AH(AR – SR)
Solutions Manual, Chapter 11 9
Exercise 11-3 (20 minutes)
1.
Number of items shipped .................................
120,000
Standard direct labor-hours per item ................
× 0.02
Total direct labor-hours allowed .......................
2,400
Standard variable overhead cost per hour .........
× $3.25
Total standard variable overhead cost ..............
$ 7,800
Actual variable overhead cost incurred .............
$7,360
Total standard variable overhead cost (above) ..
7,800
Total variable overhead variance ......................
$ 440
Favorable
2.
Actual Hours of
Input, at the
Actual Rate
Actual Hours of Input,
at the Standard Rate
Standard Hours
Allowed for Output, at
the Standard Rate
(AH×AR)
(AH×SR)
(SH×SR)
2,300 hours ×
$3.20 per hour*
2,300 hours ×
$3.25 per hour
2,400 hours ×
$3.25 per hour
= $7,360
= $7,475
= $7,800
Variable Overhead Rate
Variance, $115 F
Variable Overhead
Efficiency Variance,
$325 F
Spending Variance,
$440 F
Alternatively, the variances can be computed using the formulas:
Variable overhead rate variance:
Variable overhead efficiency variance:
10 Managerial Accounting for Managers, 4th Edition
Exercise 11-4 (30 minutes)
1.
Number of units manufactured .............................
20,000
Standard labor time per unit
(18 minutes ÷ 60 minutes per hour) ..................
× 0.3
Total standard hours of labor time allowed ............
6,000
Standard direct labor rate per hour .......................
× $12
Total standard direct labor cost ............................
$72,000
Actual direct labor cost ........................................
$73,600
Standard direct labor cost ....................................
72,000
Total variance—unfavorable .................................
$ 1,600
2.
Actual Hours of
Input, at the
Actual Rate
Actual Hours of Input,
at the Standard Rate
Standard Hours Allowed
for Output, at the
Standard Rate
(AH × AR)
(AH × SR)
(SH × SR)
5,750 hours ×
$12.00 per hour
6,000 hours* ×
$12.00 per hour
$73,600
= $69,000
= $72,000
Rate Variance,
$4,600 U
Efficiency Variance,
$3,000 F
Spending Variance,
$1,600 U
Alternatively, the variances can be computed using the formulas:
Labor rate variance = AH (AR – SR)
