CHAPTER 11
SOLUTIONS TO EXERCISES—SET B
EXERCISE 11-1B
(a) Direct materials: (2,000 X 2.5) X $5 = $25,000
Direct labor: (2,000 X 1/2) X $18 = $18,000
(b) Direct materials: 2.5 X $5 = $12.50
(c) The advantages of standard costs which are carefully established and
prudently used are:
1. Management planning is facilitated.
2. Greater economy is promoted by making employees more cost–
conscious.
EXERCISE 11-2B
Ingredient
Amount
Per
Gallon
Standard
Waste
Standard
Usage
Standard
Price
Standard
Cost Per
Gallon
Water (2,500 ÷ 50)
Grape concentrate
Sugar (54 ÷ 50)
Lemons (60 ÷ 50)
66* oz.
1.08 lb.
1.2
4%
10%
20%
(a)
(b)
(c)
68.75 oz.
1.2 lb.
1.5
$.08
.30
.66
$5.50
.36
.99
*3,300 ÷ 50
EXERCISE 11-3B
Direct materials
Cost per pound [$3 – (1% X $3) + $0.25] $3.22
Pounds per unit (4.5 + 0.5) X 5 $16.10
Direct labor
Cost per hour ($10 + $3) $ 13
Hours per unit (2 + .2) X 2.2 28.60
EXERCISE 11-4B
(a)
Actual service time
Setup and downtime
Cleanup and rest periods
Standard direct labor hours per oil change
0.90 hours
0.09 hours
0.27 hours
1.26 hours
(b)
(d)
Direct labor quantity variance
Hourly wage rate
Payroll taxes ($12 X 12%)
$12.00
1.44
EXERCISE 11-5B
(a) Total materials variance:
( AQ X AP )
(27,000 X $3.80)
$102,600
–
–
( SQ X SP )
(26,000* X $4.00)
$104,000
=
$1,400 F
(b) Total materials variance:
( AQ X AP )
(25,200 X $4.20)
$105,840
–
–
( SQ X SP )
(26,000 X $4.00)
$104,000
=
$1,840 U
Materials price variance:
–
=
(25,200 X $4.00)
–
–
( SQ X SP )
(26,000 X $4.00)
=
$3,200 F
( AQ X AP )
–
( AQ X SP )
( AQ X SP )
=
(27,000 X $4.00)
$108,000
–
–
( SQ X SP )
(26,000 X $4.00)
=
$4,000 U
EXERCISE 11-6B
(a) Total labor variance:
( AH X AR )
–
( SH X SR )
(b) Labor price variance:
( AH X AR )
(30,500 X $10.10)
$308,050
–
–
( AH X SR )
(30,500 X $10.00)
$305,000
=
$3,050 U
Labor quantity variance:
(30,500 X $10.00)
–
$300,000
=
$5,000 U
( AH X SR )
–
( SH X SR )
(c) Labor price variance:
( AH X AR )
(30,500 X $10.10)
$308,050
–
–
( AH X SR )
(30,500 X $10.20)
$311,100
=
$3,050 F
Labor quantity variance:
( AH X SR )
(30,500 X $10.20)
$311,100
–
–
( SH X SR )
$326,400
=
$15,300 F
EXERCISE 11-7B
Total materials variance:
( AQ X AP )
(1,600 X $2.62*)
$4,192
–
–
( SQ X SP )
(1,500** X $2.50)
$3,750
=
$442 U
(30,500 X $10.10)
$308,050
–
=
EXERCISE 11-7B (Continued)
Materials quantity variance:
( AQ X SP )
(1,600 X $2.50)
$4,000
–
–
( SQ X SP )
(1,500 X $2.50)
$3,750
=
$250 U
Total labor variance:
( AH X AR )
(760 X $11.50*)
$8,740
–
–
( SH X SR )
(775** X $12.00)
$9,300
=
$560 F
$8,740
$9,120
=
$9,300
=
$180 F
EXERCISE 11-7B (Continued)
(Not Required)
Materials Variance Matrix
(1)
(2)
(3)
Actual Quantity
X Actual Price
Actual Quantity
X Standard Price
Standard Quantity
X Standard Price
1,600 X $2.62 = $4,192
1,600 X $2.50 = $4,000
1,500 X $2.50 = $3,750
Labor Variance Matrix
(1)
(2)
(3)
Actual Hours
X Actual Rate
Actual Hours
X Standard Rate
Standard Hours
X Standard Rate
760 X $11.50 = $8,740
760 X $12.00 = $9,120
775 X $12.00 = $9,300
EXERCISE 11-8B
(a) Total materials variance:
( AQ X AP )
(910 X $89)
$80,990
–
–
( SQ X SP )
(900 X $90)
$81,000
=
$10 F
Materials price variance:
( AQ X AP )
(910 X $89)
$80,990
–
–
( AQ X SP )
(910 X $90)
$81,900
=
$910 F
(b) The unfavorable materials quantity variance may be caused by the
carelessness or inefficiency of production workers. Alternatively, the
–
( SQ X SP )
$900 U
( AH X AR )
(3,200 X $13)
$41,600
–
–
( SH X SR )
$38,880
=
$2,720 U
$41,600
–
$38,400
=
$3,200 U
( AH X SR )
–
$480 F
EXERCISE 11-8B (Continued)
The unfavorable labor price variance may be caused by misallocation of
the work force by the production department. In this case, more
experienced workers may have been assigned to tasks normally done by
inexperienced workers. An unfavorable labor variance may also occur when
workers are paid higher wages than expected. The manager who
authorized the wage increase is responsible for this variance.
EXERCISE 11-9B
(a) Number of units = Total standard cost ÷ Standard cost per unit
Number of units = $396,000 ÷ $18.00 (6 lb X $3 per lb) = 22,000
(b) AQ = [(SQ X SP) Quantity variance] ÷ SP
AQ = ($396,000 – $9,000) ÷ $3.00 per lb = 129,000 pounds
EXERCISE 11-10B
MICKY TOOL & DIE COMPANY
Direct Labor Variance Report
For the Month Ended March 31, 2017
Job
No.
Actual
Hours
Standard
Hours
Quantity
Variance
(a)
Actual
Rate
(1)
Standard
Rate
(2)
Price
Variance
(b)
Explanation
U
F
worker
New trainee
B257
B258
B259
220
450
240
225
430
240
$125.00
(500.00
( 0
F
U
$25.00
$27.00
$25.75
$25.00
$25.00
$25.00
$ 0
900.00
180.00
U
U
Repeat job
Rush job
Replacement
±
±
±
±
EXERCISE 11-11B
Total overhead variance:
Actual Overhead
–
Overhead Applied
EXERCISE 11-12B
(a)
Overhead Budget
(at normal capacity)
÷
Direct Labor Hours
(at normal capacity)
=
Predetermined
Overhead Rate
Variable
$200,000
100,000
$2
Fixed
800,000
100,000
$8
(b)
=
(c)
$986,000
=
$94,000 F
($186,000 + $800,000)
EXERCISE 11-13B
(a)
(AQ X AP)
( $13,000)
–
–
( SQ X SP)
(3,080* X $4)
=
=
Total Materials Variance
$680 U
(AQ X AP)
( $13,000)
–
–
=
=
Materials Price Variance
–
–
( SQ X SP)
=
=
Materials Quantity Variance
(b) One possible cause of an unfavorable materials quantity variance is
the purchase of substandard materials. Such materials would
normally be purchased at a lower price than normal, which means
$4,000 U
EXERCISE 11-14B
(a) PLEASANT LANDSCAPING
Variance Report – Purchasing Department
For the Current Month
Project
Actual
Pounds
Purchased
(1)
Actual
Price
(2)
Standard
Price
Price
Variance
(a)
Explanation
Bear
500
$2.80
$3.00
$100 F
Purchased poor quality seeds
(b) PLEASANT LANDSCAPING
Variance Report – Production Department
For the Current Month
Project
Actual
Pounds
Standard
Pounds
Standard
Price
Quantity
Variance
(b)
Explanation
Bear
Kanyon
500
400
460
410
$3.00
3.00
$120 U
30 F
Purchased poor quality seeds
Purchased higher quality seeds
EXERCISE 11-15B
NEWMAR CORPORATION
Variance Report – Purchasing Department
For Week Ended January 9, 2017
Type of
Materials
Quantity
Purchased
Actual
Price
Standard
Price
Price
Variance
Explanation
Soda10
15,000 lbs.
$5.20
$5.00
$3,000 U
Price increase
15,000 = $3,000/($5.20 – $5.00).
$3,000 U because the actual price ($5.20) exceeds the standard price ($5.00).
EXERCISE 11-16B
POTTER COMPANY
Income Statement
For the Month Ended January 31, 2017
Sales (6,000 X $8) ………………………………………………….. $48,000
Cost of goods sold (6,000 X $6) ……………………………… 36,000
Gross profit (at standard) ………………………………………. 12,000
Variances
Materials price ……………………………………………….. $2,250
Materials quantity …………………………………………… (700)
*EXERCISE 11-17B
1. Raw Materials Inventory (25,000 X $4.30) ……………. 107,500
Materials Price Variance (25,000 X $.20) ……………… 5,000
Accounts Payable (25,000 X $4.50) ………………. 112,500
2. Work in Process Inventory (23,500 X $4.30) ………… 101,050
*EXERCISE 11-18B
(a) $151,000 ($148,000 + $3,000).
(b) $148,000 ($151,000 – $3,000).
*EXERCISE 11-19B
Raw Materials Inventory (1,600 X $2.50) ………………………. 4,000
*EXERCISE 11-19B (Continued)
Work in Process Inventory (1,500* X $2.50) …………………. 3,750
Materials Quantity Variance (100 X $2.50) ……………………. 250
Raw Materials Inventory (1,600 X $2.50) ……………….. 4,000
*250 X 6
*250 X 3.1
*EXERCISE 11-20B
(a)
Item
Amount
Hours
Rate
Total overhead …………………………………
$55,000
11,000
Variable overhead …………………………….
$33,000
11,000
$3
(b) Total overhead variance:
Actual Overhead
$54,000
–
–
Overhead Applied
$50,000
(10,000* X $5)
=
$4,000 U
$54,000
–
$52,000
=
*EXERCISE 11-20B (Continued)
(c) The overhead controllable variance is generally associated with variable
overhead costs. Thus, this variance indicates the production manager’s
inefficiency in controlling variable overhead costs.
*EXERCISE 11-21B
(a)
(1)
Total actual overhead cost
=
Overhead
Budgeted +
Overhead
Controllable
Variance
=
($16,000 + $11,500) + $1,500
=
$29,000
=
=
=
*$11,500 ÷ $5 per hour = 2,300 hours
(b)
Number of loans processed
=
Standard hours allowed ÷
Standard hours per application
*EXERCISE 11-22B
(a)
(Actual)
($21,000)
–
–
(Applied)
(1,800 X $11*)
=
=
Total Overhead Variance
$1,200 U
*$198,000/18,000
(Actual)
($21,000)
–
–
(Budgeted)
($18,600)
=
=
Overhead Controllable Variance
$2,400 U
(b) The cause of an unfavorable controllable variance could be higher than
expected use of indirect materials, indirect labor, and factory supplies, or
increases in indirect manufacturing costs, such as fuel and maintenance
=
SOLUTIONS TO EXERCISES—SET C
PROBLEM 11-1C
(a) Total materials variance:
( AQ X AP )
(20,500 X $4.90)
$100,450
–
–
( SQ X SP )
(19,600* X $5.00)
$98,000
=
$2,450 U
Materials quantity variance:
( AQ X SP )
(20,500 X $5.00)
$102,500
–
–
( SQ X SP )
(19,600 X $5.00)
$98,000
=
$4,500 U
Total labor variance:
( AH X AR )
(19,600 X $12.20)
$239,120
–
–
( SH X SR )
(19,600* X $12.00)
$235,200
=
$3,920 U
$239,120
–
–
$235,200
=
$3,920 U
$235,200
–
–
( SH X SR )
=
*9,800 X 2
(b) Total overhead variance:
Actual
Overhead
($78,100 + $59,200)
$137,300
–
–
Overhead
Applied
(19,600 X $7.00*)
$137,200
=
$100 U
*Standard per labor hour overhead cost ($4 variable + $3 fixed).
$100,450
–
=
$2,050 F
PROBLEM 11-2C
(a) (1) Total materials variance:
( AQ X AP )
(21,000 X $3.30)
$69,300
–
–
( SQ X SP )
(22,000 X $3.00)
$66,000
=
$3,300 U
(2) Total labor variance:
( AH X AR )
(3,450 X $11.80)
$40,710
–
–
( SH X SR )
(3,600 X $12.50)
$45,000
=
$4,290 F
( AH X AR )
$40,710
–
–
$43,125
=
$2,415 F
–
( SH X SR )
(b) Total overhead variance:
Actual
Overhead
$101,500
–
–
Overhead
Applied
$104,400
(3,600 X $29*)
=
$2,900 F
( AQ X AP )
–
–
$63,000
=
$6,300 U
( AQ X SP )
–
( SQ X SP )
PROBLEM 11-2C (Continued)
(c) BORTON MANUFACTURING COMPANY
Income Statement
For the Month Ended July 31, 2017
Sales …………………………………………………………. $280,000
Cost of goods sold (at standard) …………………. 215,4001
Gross profit (at standard) …………………………... 64,600
Variances
Materials price …………………………………….. $ 6,300
Materials quantity ……………………………….. (3,000)
PROBLEM 11-3C
(a) (1) Total materials variance:
( AQ X AP )
(76,000 X $7.20)
$547,200
–
–
( SQ X SP )
(78,500* X $6.90)
$541,650
=
$5,550 U
*15,700 X 5
Materials price variance:
(2) Total labor variance
( AH X AR )
(14,900 X $11.20)
$166,880
–
–
( SH X SR )
(15,700 X $11.40)
$178,980
=
$12,100 F
( AH X AR )
(14,900 X $11.20)
$166,880
–
–
$169,860
=
$2,980 F
–
–
( SH X SR )
(15,700 X $11.40)
$178,980
=
$9,120 F
(b) Total overhead variance:
Actual
Overhead
–
Overhead
Applied
$18,990 U
$547,200
–
–
=
$22,800 U
( AQ X SP )
$524,400
–
–
( SQ X SP )
$541,650
=
$17,250 F
PROBLEM 11-3C (Continued)
(c) The only variance that is more than 5% from standard is:
Labor quantity variance. The actual hours of 14,900 is 5.1% under the
standard hours of 15,700.
PROBLEM 11-4C
(a) $10,000 ÷ 200,000 = $.05; $1.00 – $.05 = $.95 standard materials price per
pound. OR
200,000 X $1.00 = $200,000; $200,000 – $10,000 = $190,000; $190,000 ÷
200,000 = $.95.
(b) $23,750 ÷ $.95 = 25,000 pounds; 200,000 + 25,000 = 225,000 standard
quantity for 50,000 units or 4.5 pounds (225,000 ÷ 50,000) per unit. OR
$190,000 + $23,750 = $213,750; $213,750 ÷ $.95 = 225,000; 225,000 ÷
50,000 = 4.5 pounds per unit.
(g) Direct materials 4.5 pounds X $.95 = $4.275; direct labor 2 X $12.00 =
$24.00; manufacturing overhead 2 X $8.30 = $16.60. $4.275 + $24.00 +
$16.60 = $44.875 standard cost per unit.
(h) 100,000 X $8.30 = $830,000 overhead applied.
PROBLEM 11-5C
(a) Materials price variance:
( AQ X AP )
(2,540 X $2.05*)
$5,207
–
–
( AQ X SP )
(2,540 X $2.00)
$5,080
=
$127 U
*$5,207 ÷ 2,540
(b) Total overhead variance:
Actual Overhead
$16,000
–
–
Overhead Applied
$15,000
–
=
(AH X AR)
(1,240 X $21.10*)
–
–
$1,364 U
–
–
=
$200 F
PROBLEM 11-5C (Continued)
(c) ALOE LABS
Income Statement
For the Month Ended May 31, 2017
Service revenue ……………………………………………… $58,000
Cost of service provided (at standard)
($18 X 2,500) ……………………………………………….. 45,000
Gross profit (at standard) ……………………………….. 13,000
Variances
(d) The unfavorable materials price variance could be caused by price
increases, using the wrong shipping method, or rising prices.
The unfavorable materials quantity variance could be caused by inex–
perienced workers, carelessness, poor quality material, or faulty test
procedures.
*PROBLEM 11-6C
(a) 1. Raw Materials Inventory (8,200 X $4.00) ……… 32,800
2. Work in Process Inventory …………………………. 30,800
(7,700* X $4.00)
Materials Quantity Variance ……………………….. 2,000
3. Factory Labor (5,200 X $9.00) …………………….. 46,800
Labor Price Variance …………………………………. 1,300
4. Work in Process Inventory …………………………. 49,500
(5,500 X $9.00)
Factory Labor …………………………………….. 46,800
5. Manufacturing Overhead …………………………... 85,760
Accounts Payable ………………………………. 85,760
6. Work in Process Inventory …………………………. 84,700
(5,500 X $15.40)
Manufacturing Overhead …………………….. 84,700
9. Selling and Administrative Expenses ………… 65,000
Accounts Payable ……………………………… 65,000
*PROBLEM 11-6C (Continued)
(b)
Raw Materials Inventory
Materials Price Variance
Work in Process Inventory
(1) 32,800
(2) 32,800
(1) 3,280
(2) 30,800
(4) 49,500
(6) 84,700
(7) 165,000
(c) Overhead Variance (1) …………………………………………… 1,060
Manufacturing Overhead…………………………………. 1,060
(d) PLANTER MANUFACTURING COMPANY
Income Statement
For the Month Ended January 31, 2017
Sales revenue ………………………………………………… $280,000
Cost of goods sold (at standard) …………………….. 165,000
(5,500 X $30)
Gross profit (at standard) ……………………………….. 115,000
Variances
*PROBLEM 11-7C
Overhead controllable variance:
Actual
Overhead
Overhead volume variance:
Fixed Overhead
X
Normal
Capacity
–
Standard
Hours
*PROBLEM 11-8C
Overhead controllable variance:
Actual
Overhead
$101,500
–
–
Overhead
Budgeted
$102,600
=
$1,100 F
PROBLEM 11-9C
Overhead controllable variance:
Actual
Overhead
–
Overhead
Budgeted
Overhead volume variance:
Fixed Overhead
X
Normal
Capacity
–
Standard
Hours
*PROBLEM 11-10C
Overhead controllable variance:
Actual Overhead
$16,000
[($10,100 + $5,900)
–
–
–
Overhead Budgeted
$16,000
[(1,250 X $8) + $6,000]
=
$0
Overhead volume variance:
Capacity
=
$1,000 U