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Solutions Manual, Chapter 10 21
Exercise 10-7 (15 minutes)
Notice in the solution below that the materials price variance is
computed for the entire amount of materials purchased, whereas the
materials quantity variance is computed only for the amount of materials
used in production.
Actual Quantity of
Input, at Actual Price
A
ctual Quantity
of Input, at
Standard Price
Standard Quantity
Allowed for Output,
at Standard Price
Alternatively, the variances can be computed using the formulas:
Materials price variance = AQ (AP – SP)
A
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22 Managerial Accounting, 16th Edition
Exercise 10-8 (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.
A
ctual 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)
Exercise 10-8 (continued)
b. Direct labor variances:
A
ctual Hours of
Input, at the
Actual Rate
A
ctual Hours of Input,
at the Standard Rate
Standard Hours Allowed
for Output, at the
Standard Rate
(AH × AR) (AH × SR) (SH × SR)
v
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24 Managerial Accounting, 16th Edition
Exercise 10-8 (continued)
2. A variance usually has many possible explanations. In particular, we
should always keep in mind that the standards themselves may be
Materials Price Variance
Since this variance is favorable, the actual price
paid per unit for the material was less than the standard price. This could
occur for a variety of reasons including the purchase of a lower grade
Materials Quantity Variance
Since this variance is unfavorable, more
materials were used to produce the actual output than were called for by
Labor Rate Variance
Since this variance is unfavorable, the actual
average wage rate was higher than the standard wage rate. Some of the
Labor Efficiency Variance
Since this variance is unfavorable, the actual
number of labor hours was greater than the standard labor hours allowed
for the actual output. As with the other variances, this variance could have
been caused by any of a number of factors. Some of the possible
It is worth noting that all of these variances could have been caused by
Problem 10-9 (45 minutes)
This problem is more difficult than it looks. Allow ample time for discussion.
1.
Actual Quantity of
Input, at Actual Price
A
ctual Quantity
of Input, at
Standard Price
Standard Quantity
Allowed for Output,
at Standard Price
(AQ × AP) (AQ × SP) (SQ × SP)
v
Problem 10-9 (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 direct labor rate per hour.
A
ctual Hours of
Input, at the
Actual Rate
A
ctual Hours of
Input, at the
Standard Rate
Standard Hours
Allowed for Output,
at the Standard Rate
(AH × AR) (AH × SR) (SH × SR)
v
v
Problem 10-9 (continued)
3.
A
ctual Hours of
Input, at the
Actual Rate
A
ctual Hours of
Input, at the
Standard Rate
Standard Hours
Allowed for Output,
at the Standard Rate
(AH × AR) (AH × SR) (SH × SR)
v
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
28 Managerial Accounting, 16th Edition
Problem 10-10 (45 minutes)
1.
Standard
Quantity or
Hours
Standard Price
or Rate
Standard
Cost
A
lpha6:
Direct materials
—
X442 …… 1.8 kilos $3.50 per kilo $ 6.30
—
T
Zeta7:
Direct materials
—
X442 …… 3.0 kilos $3.50 per kilo $10.50
Direct materials
—
Y
661 …… 4.5 liters $1.40 per liter 6.30
—
—
T
—
Y
—
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
Solutions Manual, Chapter 10 29
Problem 10-10 (continued)
2. The computations to follow will require the standard quantities allowed
for the actual output for each material.
Standard Quantity Allowed
Material X442:
Material Y661:
Direct materials variances—Material X442:
Materials quantity variance = SP (AQ – SQ)
Materials price variance = AQ (AP – SP)
Direct materials variances—Material Y661:
Materials quantity variance = SP (AQ – SQ)
Materials price variance = AQ (AP – SP)
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30 Managerial Accounting, 16th Edition
Problem 10-10 (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
Sinterin
g
:
Production of Alpha6 (0.20 hours per unit × 1,500 units) … 300 hours
Finishin
g
:
Production of Alpha6 (0.80 hours per unit × 1,500 units) … 1,200 hours
Direct labor variances—Sintering:
Labor efficiency variance = SR (AH – SH)
Labor rate variance = AH (AR – SR)
Direct labor variances—Finishing:
Labor efficiency variance = SR (AH – SH)
Labor rate variance = AH (AR – SR)