Accounting Chapter 16 Homework Time Variance Actual Time Standard Time 1

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN) (Concluded)

Actual costs 30,300 Applied costs 30,100

($16,800 + $13,500) [4,300 × ($4.00 + $3.00)]

Balance (underapplied) 200

Alternative Computation of Overhead Variances

Factory Overhead

22-41

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–4A (FIN MAN); Prob. 7–4A (MAN)

Normal capacity for the month 8,400 hrs.

Actual production for the month 8,860 hrs.

Budget Actual Favorable Unfavorable

Variable costs:1

Indirect factory wages $ 31,896 $ 32,400 $ 504

Fixed costs:

Supervisory salaries $ 20,000 $ 20,000

Depreciation of plant and

equipment 36,200 36,200

Insurance and property taxes 15,200 15,200

1The budgeted variable costs are determined by multiplying the 8,860 actual hours

by the variable overhead rate (the May budget divided by 8,400 hours for each

variable overhead cost). Thus,

TIGER EQUIPMENT INC.

Factory Overhead Cost Variance Report—Welding Department

For the Month Ended May 31, 2014

Variances

22-42

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–4A (FIN MAN); Prob. 7–4A (MAN) (Concluded)

Actual costs 143,050 Applied costs* 146,190

[8,860 × ($8.00 + $8.50)]

Balance (overapplied) 3,140

Alternative Computation of Overhead Variances

Factory Overhead

22-43

1. Actual hours provided (5 × 40 hrs.)………………………………………………

…

200

…

2. Actual hours provided (5 × 40 hrs.)………………………………………………

…

200

Standard hours required for the actual results*………………………………

…

226

…

3. Actual labor rate………………………………………………………………………

…

$40

Standard labor rate…………………………………………………………………

…

32

…

4. The labor rate and time variances fail to consider the number of errors in the

code from programmer fatigue. A program that has many errors will require

5. Actual hours provided (6 × 40 hrs.)………………………………………………

…

240

…

6. Hiring an extra employee is less costly than the bonus by $320. The direct labor

cost variance for paying the bonus was $768 unfavorable, which is the sum of the

22-44

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–1B (FIN MAN); Prob. 7–1B (MAN)

a. Standard

Materials and

Labor Cost

per Unit

Direct materials ($5.00 × 5.0 yds.)………………………………………………

…

$25.00

b.

Price variance:

Quantity variance:

Total direct materials cost variance:

= (Actual Price – Standard Price) × Actual Quantity

Direct Materials Price Variance +

Direct Materials Quantity Variance

(Actual Quantity – Standard Quantity) × Standard Price

Direct Materials Cost Variance

Direct Materials

Price Variance

Direct Materials

Cost Variance =

Direct Materials

Quantity Variance

=

22-45

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–1B (FIN MAN); Prob. 7–1B (MAN) (Concluded)

c.

Rate variance:

Time variance:

Total direct labor cost variance:

Direct Labor Cost Variance

(Actual Direct Labor Hours – Standard Direct Labor Hours)

× Standard Rate per Hour

(Actual Rate per Hour – Standard Rate per Hour)

× Actual Hours

=

Direct Labor

Rate Variance

Direct Labor

Time Variance

=

Direct Labor

Cost Variance = Direct Labor Rate Variance + Direct Labor Time Variance

22-46

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–2B (FIN MAN); Prob. 7–2B (MAN)

1. a.

Direct Materials Variance

Price variance:

Actual price…………………………………

…

$ 1.90 $ 8.20

Standard price……………………………… 2.00 8.00

Quantity variance:

Actual quantity used………………………

…

48,000 85,100

Alternatively total direct materials cost variance:

Actual cost 2………………………………… $91,200 $697,820

Filler Liner Total

22-47

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–2B (FIN MAN); Prob. 7–2B (MAN) (Concluded)

1. b.

Direct Labor Variance

Rate variance:

Actual rate…………………………………

…

$ 14.10 $ 13.30

Time variance:

Actual time…………………………………

…

1,825 2,800

…

Alternatively, total direct labor cost variance:

Actual cost 2………………………………… $25,732.50 $37,240

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

Coats Coats Total

Women’s Men’s

22-48

…

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN)

a.

Price variance:

Quantity variance:

Total direct materials cost variance:

Direct Materials Cost Variance

= (Actual Price – Standard Price) × Actual Quantity

Direct Materials

Cost Variance =Direct Materials Price Variance +

Direct Materials Quantity Variance

Direct Materials

Quantity Variance =

(Actual Quantity – Standard Quantity) × Standard Price

Direct Materials

Price Variance

22-49

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN) (Continued)

b.

Rate variance:

Time variance:

Total direct labor cost variance:

= Direct Labor Rate Variance + Direct Labor Time 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

22-50

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN) (Continued)

c.

Variable factory overhead controllable variance:

Actual variable factory overhead cost incurred……………………

…

$8,200

Fixed factory overhead volume variance:

Normal capacity at 100%………………………………………………

…

2,000 hrs.

Factory Overhead Cost Variance

22-51

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN) (Concluded)

Actual costs 20,200 Applied costs 20,800

Alternative Computation of Overhead Variances

Factory Overhead

22-52

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–4B (FIN MAN); Prob. 7–4B (MAN)

Budget Actual Favorable Unfavorable

Variable costs:1

Indirect factory wages $235,125 $234,000 $(1,125)

Fixed costs:

Supervisory salaries $126,000 $126,000

Depreciation of plant and

Net controllable variance—favorable $ (1,450)

Volume variance—unfavorable:

1The budgeted variable costs are determined by multiplying 28,500 actual hours

by the variable overhead rate (the October budget divided by 30,000 hours for

each variable overhead cost). Thus,

FEELING BETTER MEDICAL INC.

Factory Overhead Cost Variance Report—Assembly Department

For the Month Ended October 31, 2014

Variances

22-53

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–4B (FIN MAN); Prob. 7–4B (MAN) (Concluded)

Actual costs 703,100 Applied costs* 692,550

Alternative Computation of Overhead Variances

Factory Overhead

22-54

CHAPTER 22 Performance Evaluation Using Variances from Standard Costs

Prob. 22–5B (FIN MAN); Prob. 7–5B (MAN)

1. Actual hours provided (3 × 40 hrs.)………………………………………………

…

120

Standard hours required for the original plan*…………………………………

…

117

2. Actual hours provided (3 × 40 hrs.)………………………………………………

…

120

Standard hours required for the actual results*………………………………

…

127

…

3. Actual labor rate………………………………………………………………………

…

$30

Standard labor rate…………………………………………………………………

…

23

…

4. Actual hours provided (4 × 40 hrs.)………………………………………………

…

160

…

5. The bonus is the better approach by $80. The direct labor cost variance for

paying the bonus was $679 unfavorable which is the sum of the time variance

6. The labor rate and time variances fail to consider the number of errors in the

report from typist fatigue. A report that has many errors will require significant

22-55

…