Solutions Manual, Chapter 11 11
Exercise 11-4 (continued)
3.
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 ×
$4.00 per hour
6,000 hours ×
$4.00 per hour
$21,850
= $23,000
= $24,000
Rate Variance,
$1,150 F
Efficiency Variance,
$1,000 F
Spending Variance,
$2,150 F
Alternatively, the variances can be computed using the formulas:
Exercise 11-5 (20 minutes)
1. If the labor spending variance is $93 unfavorable, and the rate variance
is $87 favorable, then the efficiency variance must be $180 unfavorable,
Efficiency variance = SR (AH – SH)
Solutions Manual, Chapter 11 13
Exercise 11-5 (continued)
An alternative approach would be to work from known to unknown data
in the columnar model for variance analysis:
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)
145 hours ×
$8.40 per hour
145 hours ×
$9.00 per hour*
125 hours§ ×
$9.00 per hour*
= $1,218
= $1,305
= $1,125
Rate Variance,
$87 F*
Efficiency Variance,
$180 U
Spending Variance,
$93 U*
§50 tune-ups* × 2.5 hours per tune-up* = 125 hours
*Given
14 Managerial Accounting for Managers, 4th Edition
Exercise 11-6 (20 minutes)
1.
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)
20,000 pounds ×
$2.35 per pound
20,000 pounds ×
$2.50 per pound
18,400 pounds* ×
$2.50 per pound
= $47,000
= $50,000
= $46,000
Price Variance,
$3,000 F
Quantity Variance,
$4,000 U
Spending Variance,
$1,000 U
*4,000 units × 4.6 pounds per unit = 18,400 pounds
Alternatively, the variances can be computed using the formulas:
Solutions Manual, Chapter 11 15
Exercise 11-6 (continued)
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)
750 hours ×
$12.00 per hour
800 hours* ×
$12.00 per hour
$10,425
= $9,000
= $9,600
Rate Variance,
$1,425 U
Efficiency Variance,
$600 F
Spending Variance,
$825 U
*4,000 units × 0.2 hours per unit = 800 hours
Alternatively, the variances can be computed using the formulas:
16 Managerial Accounting for Managers, 4th Edition
Exercise 11-7 (15 minutes)
used in production.
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)
20,000 pounds ×
$2.35 per pound
20,000 pounds ×
$2.50 per pound
13,800 pounds* ×
$2.50 per pound
= $47,000
= $50,000
= $34,500
Price Variance,
$3,000 F
14,750 pounds × $2.50 per pound = $36,875
Quantity Variance,
$2,375 U
*3,000 units × 4.6 pounds per unit = 13,800 pounds
Alternatively, the variances can be computed using the formulas:
Solutions Manual, Chapter 11 17
Exercise 11-8 (30 minutes)
1. a. Notice in the solution below that the materials price variance is
computed on the entire amount of materials purchased, whereas the
materials quantity variance is computed only on the amount of
materials used in production.
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)
25,000 microns ×
$0.48 per micron
25,000 microns ×
$0.50 per micron
18,000 microns* ×
$0.50 per micron
= $12,000
= $12,500
= $9,000
Price Variance,
$500 F
20,000 microns × $0.50 per micron
= $10,000
Quantity Variance,
$1,000 U
*3,000 toys × 6 microns per toy = 18,000 microns
Alternatively, the variances can be computed using the formulas:
18 Managerial Accounting for Managers, 4th Edition
Exercise 11-8 (continued)
b. Direct labor variances:
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)
4,000 hours ×
$8.00 per hour
3,900 hours* ×
$8.00 per hour
$36,000
= $32,000
= $31,200
Rate Variance,
$4,000 U
Efficiency Variance,
$800 U
Spending Variance,
$4,800 U
*3,000 toys × 1.3 hours per toy = 3,900 hours
Alternatively, the variances can be computed using the formulas:
Solutions Manual, Chapter 11 19
Exercise 11-8 (continued)
2. A variance usually has many possible explanations. In particular, we
should always keep in mind that the standards themselves may be
incorrect. Some of the other possible explanations for the variances
observed at Dawson Toys appear below:
Materials Price Variance
Since this variance is favorable, the actual price
Materials Quantity Variance
Since this variance is unfavorable, more
Labor Rate Variance
Since this variance is unfavorable, the actual
Labor Efficiency Variance
Since this variance is unfavorable, the actual
labor efficiency variance could be caused by a reduction in output due to
decreased demand for the company’s products.
It is worth noting that all of these variances could have been caused by
20 Managerial Accounting for Managers, 4th Edition
Problem 11-9 (45 minutes)
This problem is more difficult than it looks. Allow ample time for discussion.
1.
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)
12,000 yards ×
$4.00 per yard*
11,200 yards** ×
$4.00 per yard*
$45,600
= $48,000
= $44,800
Price Variance,
$2,400 F
Quantity Variance,
$3,200 U
Spending Variance,
$800 U
*
$22.40 ÷ 5.6 yards = $4.00 per yard
**
2,000 sets × 5.6 yards per set = 11,200 yards
Alternatively, the variances can be computed using the formulas: