16–53. (40 min.) Find Data for Profit Variance Analysis.
Reported
(based on
actual sales
volume)
Manu-
facturing
Variance
Marketing and
Administrative
Variance
Sales
Price
Variance
Flexible
Budget
(based
on actual
sales
volume)
Sales
Activity
Variance
Master
Budget
(based on
budgeted
sales
volume)
Units ……………………….
24,000
24,000
b
4,000 F
20,000
Sales revenue ………….
$39,600
$3,600 F
$36,000
h
$6,000 F
i
$30,000
Less:
Variable
manufacturing costs
21,000
$1,800 U
o
19,200
3,200 U
j
16,000
Variable marketing
and
administrative costs
4,320
$480 F
p
4,800
800 U
4,000
c
q
s
k
Less:
Fixed marketing and
Operating profits ……….
t
u
w
$3,600 F
$2,000 F
l
f
16–53. (continued)
Computations:
a.
24,000 units.
see b.
b.
24,000 units.
20,000 units* + 4,000 F units.
c.
$4,000
d.
$5,000
Same as m.
$2,000
$10,000* – $5,000 (d) – $3,000 (e).
g.
$39,600
$36,000 (h) + $3,600*.
h.
$36,000
24,000 units (b) × ($30,000* ÷ 20,000 units*).
Alternative computation:
$19,200* + $4,800* + $12,000*.
i.
$6,000 F
$36,000 (h) – $30,000*.
Alternative computation:
4,000 F units* × $1.50 selling price (= $30,000 ÷ 20,000 units).
j.
$3,200 U
$19,200* – $16,000*.
k.
$2,000 F
$12,000* – $10,000*.
Alternative computation:
$6,000 F (i) – $3,200 U (j) – $800 U*.
$2,000 F
Same as k.
$5,000
$12,000* – $3,000* – $4,000*.
n.
$21,000
$19,200* + $1,800 (o).
o.
$1,800 U
Total manufacturing variance on the contribution margin line.
p.
$4,800* – $4,320*.
q.
$14,280
$39,600 (g) – $21,000 (n) – $4,320*.
$4,600
$5,000 (m) – $400 F*.
s.
Same as p.
$6,080
$14,280 (q) – $4,600 (r) – $3,600*.
u.
$1,400 U
v.
$600 U
w.
$120 U
x.
$3,600 F
Sales price variance.
16–54. (20 min.) Ethical Issues in Managing Reported Profits: Doak Industries.
Ray is trying to improve the profit on next year’s income statement. He knows that a
revised budget to reflect changes in product lines might make it harder to get a bonus next
year. Since he has reached a plateau on this year’s bonus, anything he can do to increase
next year’s profit will help him get a bonus next year. This is an unethical practice. Ray
must perform his professional duties with competence. He must prepare reports in
accordance with technical standards and generally accepted accounting principles.
Revenues and expenses must be matched to the correct period to which they belong.
16–55. (20 min.) Prepare Flexible Budget: Odessa, Inc.
Flexible
Budgeta
Calculations
Sales revenue ………………………
$86,400
$96,000
×
(540 ÷ 600)
Variable costs:
Manufacturing costs
Direct labor ……………………..
12,960
14,400
×
(540 ÷ 600)
Materials …………………………
12,096
13,440
×
(540 ÷ 600)
Variable overhead ……………
8,640
9,600
×
(540 ÷ 600)
Marketing ………………………….
5,184
5,760
×
(540 ÷ 600)
Administrative ……………………
×
(540 ÷ 600)
Total variable costs ……………….
$43,200
Contribution margin ……………….
$43,200
Less fixed costs: …………………..
4,800
Total fixed costs ……………………
$24,000
16–56. (20 min.) Sales Activity Variance: Odessa, Inc.
Flexible
Budget
(based on
actual of
540 units)
Sales Activity
Variance
Master Budget
(based on
budgeted 600
units)
Sales revenue ………………….
$86,400
$9,600
U
$96,000
Less variable costs:
Manufacturing costs:
Direct labor ……………….
12,960
1,440
F
14,400
Materials …………………..
12,096
1,344
F
13,440
Variable overhead ……..
8,640
960
F
9,600
F
Administrative……………….
480
F
Total variable costs …………..
F
Contribution margin ………….
$43,200
U
$48,000
Less fixed costs:
Manufacturing ……………
4,800
Marketing ………………….
9,600
Administrative ……………
Total fixed costs ……………….
$24,000
Operating profits ………………
$19,200
$4,800
U
$24,000
16–57. (30 min.) Profit Variance Analysis: Odessa, Inc.
Actual
(360 Units)
Manu-
facturing
Variance
Marketing &
Administrative
Variance
Sales Price
Variance
Flexible
Budget
(360 Units)
Sales
Activity
Variance
Master
Budget
(400 Units)
Sales revenue …………….
$88,320
$1,920
$86,400
$9,600
U
$96,000
Variable costs:
Manufacturing
Direct labor …………..
13,632
$672
U
12,960
1,440
F
14,400
Materials ……………..
11,520
576
F
12,096
1,344
F
13,440
Overhead …………….
F
F
Marketing ………………..
F
F
Contribution margin ……..
$45,408
$672
F
$384
U
$1,920
F
$43,200
U
$48,000
Fixed costs:
Manufacturing ………….
F
Marketing ………………..
U
Administrative ………….
F
Operating profit …………..
$21,198
$807
F
$729
U
$1,920
F
$19,200
U
$24,000
16–58. (20 min.) Prepare Flexible Budget: Brahms & Sons.
Flexible Budgeta
Calculations
Sales revenue …………………
$504,000
$480,000
×
(58,800 ÷ 56,000)
Variable costs:
Manufacturing costs
Direct materials ………….
50,400
48,000
×
(58,800 ÷ 56,000)
Direct Labor ……………….
67,200
64,000
×
(58,800 ÷ 56,000)
Variable overhead ………
67,200
64,000
×
(58,800 ÷ 56,000)
Marketing ……………………
21,000
20,000
×
(58,800 ÷ 56,000)
Administration ……………..
20,000
×
(58,800 ÷ 56,000)
Total variable costs ………….
Contribution margin …………
Less fixed costs: …………….
Administration …………….
80,000
Total fixed costs ………………
16–59. (20 min.) Sales Activity Variance: Brahms & Sons.
Flexible
Budget
(based on
actual of
58,800 units)
Sales Activity
Variance
Master Budget
(based on
budgeted
56,000 units)
Sales revenue …………………..
$504,000
$24,000
F
$480,000
Less variable costs:
Manufacturing costs:
Direct labor …………………
50,400
2,400
U
48,000
Materials ……………………
67,200
3,200
U
64,000
Variable overhead ……….
67,200
3,200
U
64,000
Marketing ………………………
21,000
1,000
U
20,000
Administration ………………..
21,000
1,000
U
Total variable costs ……………
U
Contribution margin ……………
$277,200
F
$264,000
Less fixed costs:
Manufacturing …………….
Marketing …………………..
20,000
20,000
Administration …………….
80,000
80,000
Total fixed costs ………………..
$200,000
$200,000
Operating profits ………………..
F
16–60. (30 min.) Profit variance analysis: Brahms & Sons.
Actual
(58,800 Units)
Manu-
facturing
Variance
Marketing &
Administration
Variance
Sales Price
Variance
Flexible
Budget
(58,800
Units)
Sales
Activity
Variance
Master
Budget
(56,000
Units)
Sales revenue ………..
$462,000
$42,000
$504,000
$24,000
F
$480,000
Variable costs:
Manufacturing
Direct labor ………
58,800
$ 8,400
U
50,400
2,400
U
48,000
Materials …………
54,600
12,600
F
67,200
3,200
U
64,000
Overhead ………..
F
U
Marketing ……………
20,400
F
21,000
1,000
U
20,000
Contribution margin …
$246,000
$8,000
F
F
$42,000
U
$277,200
F
$264,000
Fixed costs:
Manufacturing ……..
U
Marketing ……………
U
20,000
20,000
Administration ……..
U
80,000
80,000
Operating profit ………
$5,600
F
U
$42,000
U
F
16–61. (15 min.) Direct Materials.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
16–62. (20 min.) Solve for Direct Labor Hours: Williams Corporation.
Set up variance model:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$32.40 × AQ
$31.50 × AQ
$31.50 × 44,800
= $1,411,200
??
$201,600 F
16–63. (20 min.) Overhead Variances: Rexford Components.
Variable overhead:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
$70,560a
$27 × 2,640
= $71,280
$27 × 2,820
= $76,140
$720 F
$4,860 F
Fixed overhead:
Actual
Costs
Price
Variance
Budget
16–64. (40 min.) Manufacturing Variances: Delta Products.
Direct materials:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP × AQ)
(SP × AQ)
(SP × SQ)
$1.80 × 15,120
gallons
= $27,216
$2 × 15,120
gallons
= $30,240
$2 × 6 gallons × 2,280
units
= $27,360
Variable overhead:
$60,750
$9 × 6,400
= $57,600
$9 × 3 hours × 2,280
= $61,560
$3,150 U
$3,960 F
16–65. (20 min.) Overhead Cost and Variance Relationships: McDormand Inc.
a. Variable overhead:
= $1,017,600
$1,600 U
$9,600 F
a $30
$1,027,200 flexible budget
34,240 hours
b. Fixed overhead:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
$755,200a
$739,200b
$21c × 34,240
16–66. (20 min.) Analysis of Cost Reports: Cabot Plant.
Three possible changes that could make the cost information more meaningful are:
a. Use a flexible budget rather than a static master budget for measuring performance so
that changed conditions, volume changes, and fixed versus variable costs are
recognized in the reporting process.
b. Use standard costs.
c. Identify those elements of the report for which the production manager is directly
responsible.
16–67. (25 min.) Change Of Policy To Improve Productivity: Orange Electronics.
Currently the soldering personnel rarely complete the operations in less time than the
standard allows. Assuming that the soldering department is working efficiently, it is not
16–68. (20 min.) Ethics and Standard Costs: Farmer Frank’s.
Margaret’s behavior is unethical. Margaret has an obligation to communicate information
fairly and objectively. She must prepare complete and clear reports and
16–69. (40 min.) Comprehensive Variance Problem: Chambers Company.
Direct materials:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP × AQ)
(SP × AQ)
(SP × SQ)
16–69. (continued)
Variable overhead:
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for
Good Output)
$12a × 25,200
hours
= $302,400
$12 × 5 hours ×
5,000 units
= $300,000
??
$2,400 U
??
16–70. (40 min.) (Appendix) Recording Costs in a Standard Costing System:
Chambers Company
Direct materials:
Work-in-Process Inventory …………………….
400,000
Materials Price Variance ……………………….
11,400
Materials Efficiency Variance …………………
56,000
Accounts Payable ……………….
467,400
Direct labor:
Work-in-Process Inventory …………………….
500,000
Direct Labor Price Variance …………………..
10,080
Direct Labor Efficiency Variance …………….
4,000
Wages Payable …………………….
514,080
Work-in-Process Inventory (Variable overhead)
Work-in-Process Inventory (Fixed overhead)
Fixed Overhead Applied ………….
Overhead (Actual) …………………………………….
Accounts ……………………………………..
Variable Overhead (Applied) ………………………
Fixed Overhead (Applied) ………………………….
Overhead Price Variance …………………………..
Variable Overhead Efficiency Variance ………..
Fixed Overhead Prod. Vol. Variance ……………
16-70. (continued)
Transfer to Finished Goods
Finished Goods Inventory …………………………………….
1,300,000
Work-in-Process Inventory ……………………….
1,300,000
Record the sale of all goods.
Accounts Receivable …………………………………………..
2,375,000
Sales Revenue …………………………………………
2,375,000
Cost of Goods Sold …………………………………………….
1,300,000
Finished Goods Inventory …………………………..
1,300,000
Record the disposition of variances.
Cost of Goods Sold …………………………………………………
To close the variance accounts to Cost of Goods Sold.