CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–15 (FIN MAN); Ex. 7–15 (MAN)
a.
Direct labor hours 9,000 10,000 11,000
b. Overhead applied at actual production:
Actual hours…………………………………………………………………………
…
9,000
…
WIKI WIKI COMPANY
Monthly Factory Overhead Cost Budget—Fabrication Department
22-21
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–16 (FIN MAN); Ex. 7–16 (MAN)
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred……………
…
$262,000
22-22
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–16 (FIN MAN); Ex. 7–16 (MAN) (Concluded)
Actual costs 352,000 Applied costs 350,000
Balance (underapplied) 2,000
Alternative Computation of Overhead Variances
Factory Overhead
22-23
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–17 (FIN MAN); Ex. 7–17 (MAN)
a. Controllable variance:
Actual variable factory overhead
b. Volume variance:
V
olume at 100% of normal capacity………………………
…
100,000
V
…
$540,000
90,000 hrs.
1
=Variable factory overhead rate: $6.00 per hour
22-24
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–17 (FIN MAN); Ex. 7–17 (MAN) (Concluded)
Actual costs 782,000 Applied costs 777,000
Balance (underapplied) 5,000
Alternative Computation of Overhead Variances
Factory Overhead
*
22-25
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–18 (FIN MAN); Ex. 7–18 (MAN)
A correct determination of the factory overhead cost variances is as follows:
Variable factory overhead controllable variance:
22-26
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–18 (FIN MAN); Ex. 7–18 (MAN) (Concluded)
Actual costs 952,000 Applied costs 963,600
Alternative Computation of Overhead Variances
Factory Overhead
22-27
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–19 (FIN MAN); Ex. 7–19 (MAN)
Budget
(at actual
production) Actual Favorable Unfavorable
Variable factory overhead costs:1
Fixed factory overhead costs:
Supervisory salaries $ 54,500 $ 54,500
Depreciation of plant and
1The budgeted variable factory overhead costs are determined by multiplying
22,000 hours by the variable factory overhead cost rate for each variable cost
category. These rates are determined by dividing each budgeted amount
(estimated at the beginning of the month) by the planned (budgeted) volume
of 20,000 hours. Thus, for example:
TANNIN PRODUCTS INC.
Factory Overhead Cost Variance Report—Trim Department
For the Month Ended July 31, 2014
Variances
22-28
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–19 (FIN MAN); Ex. 7–19 (MAN) (Concluded)
Actual costs 216,700 Applied costs 200,200
Balance (underapplied) 16,500 [22,000 × ($3.90* + $5.20)]
Alternative Computation of Overhead Variances
Factory Overhead
22-29
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–20 (FIN MAN); Ex. 7–20 (MAN)
a. Materials1118,825
b. Work in Process197,000
Direct Materials Quantity Variance24,850
Ex. 22–21 (FIN MAN); Ex. 7–21 (MAN)
31 Work in Process1198,000
Mar.
22-30
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–22 (FIN MAN); Ex. 7–22 (MAN)
Sales $868,000
Cost of goods sold—at standard 550,000
Operating expenses:
Selling expenses $125,000
GRIGGS COMPANY
Income Statement
For the Month Ended December 31, 2014
22-31
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–23 (FIN MAN); Ex. 7–23 (MAN)
a. and b.
Maintenance dollars divided X A driver of the ordering system’s
by hardware investment reliability and downtime. The
maintenance dollars should be
divided by the amount of hardware
warehouse employee capacity of the warehouse relative
to the demands placed upon it.
This relationship will impact the
delivery cycle time.
Number of page faults or X The page errors will negatively
Explanation
Input
Measure
Output
Measure
22-32
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Ex. 22–24 (FIN MAN); Ex. 7–24 (MAN)
a. Possible Input Measures
Registration staffing per student
Technology investment per period for registration process
Possible Output Measures
Cycle time for a student to register for classes
Number of times a course is unavailable
Number of separate registration events or steps (log-ons or line waits)
per student
Number of times a replacement course was used by a student
Number of registration errors
Student satisfaction score with the registration process
b. Alpha University is interested in not only the efficiency of the process but
also the quality of the process. This means that the process must meet multiple
objectives. The college wants this process to meet the needs of students,
22-33
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–1A (FIN MAN); Prob. 7–1A (MAN)
a. Standard
Materials and
Labor Cost
per Faucet
b.
Price variance:
Quantity variance:
*12,000 units × 2.6 lbs.
Total direct materials cost variance:
= (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials
Quantity Variance
PROBLEMS
Direct Materials Cost Variance
Direct Materials
Price Variance
= (Actual Price – Standard Price) × Actual Quantity
Direct Materials
Cost Variance =Direct Materials Price Variance +
Direct Materials Quantity Variance
22-34
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–1A (FIN MAN); Prob. 7–1A (MAN) (Concluded)
c.
Rate variance:
Time variance:
Total direct labor cost variance:
Direct Labor Cost Variance
Direct Labor
Rate Variance
Direct Labor
Time Variance
=(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
× Standard Rate per Hour
Direct Labor
Cost Variance = Direct Labor Rate Variance + Direct Labor Time Variance
22-35
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–2A (FIN MAN); Prob. 7–2A (MAN)
1. a.
Direct Materials Variance
Price variance:
Actual price……………………………………… $ 7.33 $ 1.35
Standard price…………………………………
…
7.25 1.40
Quantity variance:
Actual quantity used…………………………
…
140,300 188,000
…
Alternatively, total direct materials cost variance:
Actual cost 2……………………………………
…
$1,028,399 $253,800
Cocoa Sugar Total
22-36
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–2A (FIN MAN); Prob. 7–2A (MAN) (Concluded)
1. b.
Direct Labor Variance
Rate variance:
Actual rate………………………………………
…
$ 15.25 $ 15.80
Time variance:
Actual time……………………………………… 2,360 6,120
…
Alternatively, total direct labor cost variance:
Actual cost 2……………………………………
…
$35,990 $96,696
2. The variance analyses should be based on the standard amounts at actual
volumes. The budget must flex with the volume changes. If the actual volume is
Chocolate Chocolate Total
Dark Light
22-37
…
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN)
a.
Price variance:
Quantity variance:
Total direct materials cost variance:
Direct Materials Cost Variance
Direct Materials
Cost Variance =
Direct Materials
Price Variance
Direct Materials
Quantity Variance (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials Price Variance +
Direct Materials Quantity Variance
= (Actual Price – Standard Price) × Actual Quantity
=
22-38
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN) (Continued)
b.
Rate variance:
Time variance:
Total direct labor cost variance:
Direct Labor
Cost Variance
=
Direct Labor Cost Variance
Direct Labor
Rate Variance
Direct Labor
Time Variance
=
(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
× Standard Rate per Hour
Direct Labor Time Variance + Direct Labor Rate Variance
22-39
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN) (Continued)
c.
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred……………………
…
$16,800
Factory Overhead Cost Variance
22-40