16–71. (20 min.) Find Actual And Budget Amounts From Variances: J&W
Corporation.
a. Direct materials:
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(AP × AQ)
(SP × AQ)
(SP × SQ)
$945,000
$8* × 112,500 kgs*
= $900,000
$8* × 2.25 kgs
× 48,000 units*
= $864,000
$45,000 U*
$36,000 U*
Direct labor:
16–71. (continued)
b. Overhead:
Actual
Costs
Applied
$432,000 + $18,000
= $450,000
$9 × 48,000*
units
= $432,000
$18,000 U*
* Given
16–72. (40 min.) Variance Computations With Missing Data: Studio Company.
Note: The calculation of the fixed overhead budget amount makes this a challenging
problem. (Footnotes follow the calculations.)
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)
$1.85a × 81,600
gallons
= $150,960
$1.65 × 81,600
gallons
= $134,640
$1.65 × 2 gallons
× 42,000 units
= $138,600
16–72. (continued)
Fixed overhead:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
=
=
This means the master budget variable overhead amount is $95,200 = $11.90 × 0.2 hour
× 40,000 units. So the fixed overhead budget is $64,000 = $159,200 – $95,200.
d $1.60
=
$64,000 budget
40,000 units
16–73.
(50 min.) Comprehensive Variance Problem: Sweetwater Company.
Mountain Mist:
a. 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)
$13.50 × 3,100
ounces
= $41,850
$15 × 3,100
ounces
= $46,500
$15 × 3 ounces
× 1,000 units
= $45,000
$4,650 F
$1,500 U
Direct labor:
× 1,000 units
16–73. (continued)
b. Fixed overhead:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
a 5,000 hours allowed = 1,000 units produced × 5 hours per unit.
16–73. (continued)
Valley Stream:
a. 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)
$17.25 × 4,700
ounces
= $81,075
$16.50 × 4,700
ounces
= $77,550
$16.50 × 4 ounces
× 1,200 units
= $79,200
$3,525 U
$1,650 F
Direct labor:
× 1,200 units
16–73. (continued)
b. Fixed overhead:
Actual
Costs
Price
Variance
Budget
Production
Volume
Variance
Applied
16–74. (40 min.) (Appendix) Recording Costs in a Standard Costing System:
Sweetwater Company.
Mountain Mist Costs:
Direct materials:
Work-in-Process Inventory …………………….
45,000
Materials Efficiency Variance …………………
1,500
Materials Price Variance ………
4,650
Accounts Payable ……………….
41,850
Variable overhead:
Work-in-Process Inventory ………………………..
240,000
Variable Overhead Applied ………
240,000
Variable Overhead (Actual) ………………………..
242,550
Miscellaneous Payables and Inventory
Accounts ……………………………………..
242,550
Variable Overhead (Applied) ………………………
16-74 (continued)
Fixed overhead:
Work-in-Process Inventory …………………………
291,600
Fixed Overhead Applied ……………
291,600
Fixed Overhead (Actual) ………….
16-74 (continued)
Valley Stream Costs:
Direct materials:
Work-in-Process Inventory …………………….
79,200
Materials Price Variance ……………………….
3,525
Materials Efficiency Variance ..
1,650
Accounts Payable ……………….
81,075
Direct labor:
Work-in-Process Inventory …………………….
540,000
Direct Labor Price Variance …………………..
11,100
Direct Labor Efficiency Variance …………….
15,000
Wages Payable …………………….
566,100
Work-in-Process Inventory ………………………..
Variable Overhead Applied ………
Variable Overhead (Actual) ………………………..
Variable Overhead (Applied) ………………………
378,000
Variable Overhead Efficiency Variance ………..
10,500
378,510
16–74 (continued)
Fixed overhead:
Work-in-Process Inventory …………………………
367,200
Fixed Overhead Applied ……………
367,200
Fixed Overhead (Actual) …………………………...
396,000
Miscellaneous Payables and Inventory
Accounts ……………………………………….
396,000
Fixed Overhead (Applied) ………………………….
367,200
Fixed Overhead Prod. Vol. Variance …………..
30,600
Fixed Overhead Price Variance …
1,800
Fixed Overhead (Actual) ………….
396,000
Finished Goods Inventory (Mountain Mist) ……………..
Finished Goods Inventory (Valley Stream) ……………..
Accounts Receivable …………………………………………..
3,150,000
Cost of Goods Sold (Mountain Mist) ………………………
Cost of Goods Sold (Valley Stream) ………………………
16-74 (continued)
Record the disposition of variances.
Cost of Goods Sold ………………………………………………………
76,710
Materials Price Variance (Mountain Mist) …………………………
4,650
Materials Efficiency Variance (Valley Stream) ………………….
1,650
Direct Labor Efficiency Variance (Mountain Mist) ………………
6,000
Variable Overhead Efficiency Variance (Mountain Mist) ……..
4,800
Variable Overhead Price Variance (Valley Stream) ……………
9,990
Fixed Overhead Price Variance (Mountain Mist) ……………….
21,390
Fixed Overhead Price Variance (Valley Stream) ……………….
1,800
Materials Efficiency Variance (Mountain Mist) …………..
1,500
Materials Price Variance (Valley Stream) …………………
3,525
Direct Labor Price Variance (Mountain Mist) …………….
3,675
Direct Labor Price Variance (Valley Stream) …………….
Direct Labor Efficiency Variance (Valley Stream) ………
Variable Overhead Price Variance (Mountain Mist) ……
7,350
Variable Overhead Efficiency Variance (Valley Stream)
Fixed Overhead Prod. Vol. Variance (Mountain Mist) …
Fixed Overhead Prod. Vol. Variance (Valley Stream) …
To close the variance accounts to Cost of Goods Sold.
16–75. (40 min.) Variance Analysis with Missing Data
Actual
(Given)
Manu-
facturing
Variance
Marketing &
Administration
Variance
Sales Price
Variance
Flexible
Budget
Sales
Activity
Variance
Master
Budget
Sales units
180,000
180,000
(a)
162,000
(a)
Sales revenue ………..
$963,000
$63,000
F
$900,000
(h)
$90,000
F
$810,000
(b)
Variable costs:
Manufacturing ………
324,000
72,000
U
252,000
(i)
25,200
U
226,800
(g)
Marketing and
Administration ……..
90,000
18,000
F
(j)
U
(f)
Contribution margin …
$549,000
U
F
F
F
$486,000
(e)
Fixed costs:
F
(k)
(d)
Administration ……..
84,000
U
(l)
(a)
Operating profit ………
$226,000
U
F
F
F
(c)
16-75 (continued)
(a)
Given
(b)
= 162,000 units × $5 selling price (given)
(c)
= 162,000 units × $1 budgeted operating profit (given)
(d)
= 162,000 × $1.50 budgeted unit fixed overhead (given)
(e)
= $162,000 operating profit + $324,000 total fixed costs
(f)
= $810,000 revenue × 12 percent (given)
(h)
= 180,000 actual units (given) × $5 selling price (given)
(j)
= $900,000 revenues × 12 percent (given)
(k)
= Master budgeted fixed cost.
(l)
= Master budgeted fixed cost.
16–76. (30 min) Ethics and Efficiencies.
It is critical that revenues and expenses be matched to the correct period. This is one of
the fundamental principles of accounting, “the matching principle.” While it is tempting to
save for a rainy day as the new CEO maintains, the motivation and the extent of the
manipulation is fraudulent.
16–77. (60 min to 90 min) Performance Measurement and Variances: agm.com.
a.
The following variances can be computed to understand better why actual income fell
short of budgeted income.
Factor:
Initial income variance ……..
($88,760 – $6,800)
81,960
U
Sales variances
Sales price variance ……
$176,000 – (8,000 $25)
24,000
U
Sales volume variance ..
(8,000 – 8,000) $25
–0–
Total sales variance .
24,000
U
Production cost variances
Reed …………………….
F
Handle ………………….
F
Labor ……………………
U
5,600
U
Reed …………………….
F
Labor ……………………
U
5,600
U
Variable overhead
Spending ………………
U
Efficiency ………………
U
U
Fixed overhead ………..
Marketing variance ………….
45,000
U
16-77. (continued)
b.
The two specific items in the case that deal directly with this are the material savings and
the strike. The estimated cost of the strike can be computed as:
Lost sales ……….
400 baskets $12.40 (budgeted contribution margin)
$ 4,960
Shipping …………
13,000
Marketing ……….
32,000
Total ……………
$49,960
We can think about including lost sales even though she sold the planned 8,000. She
might have been able to sell (and produce) more if there was no strike.
The materials savings of $8,000 (= 20% $5 8,000 units) are already incorporated in
the total material efficiency variance. There is no reason she should receive credit for
these and not be held responsible for the other efficiency losses.
