Problem 21-3A (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Actual material used:
91,000 lbs. (given)
Standard quantity of materials:
15,000 units x 6 lb./unit = 90,000 lb.
Actual price:
$5.10/lb. (given)
Standard price:
$5.00/lb. (given)
Direct material cost variances
Actual units at actual cost [91,000 lbs. @ $5.10] ……………………………….
$464,100
Standard units at standard cost [90,000 lbs. @ $5.00] ………………………
450,000
Direct material cost variance …………………………………………………………..
$ 14,100 U
Direct Materials Price and Quantity Variances
Standard Costs
SQ x SP
Alternate solution format
=
AQ x (AP – SP)
=
91,000 lb. x ($5.10 – $5.00) per lb.
=
91,000 lb. x ($0.10) per lb.
=
$9,100 U
=
(AQ – SQ) x SP
=
(91,000 – 90,000) lb. x $5.00 per lb.
=
1,000 lb. x $5.00 per lb.
=
$5,000 U
Problem 21-3A (Continued)
Part 4 Direct labor variances
Preliminary computations
Actual hours used:
30,500 hours (given)
Standard hours:
15,000 units x 2 hrs./unit = 30,000 hours
Actual rate:
$17.25/hr. (given)
Standard rate:
$17.00/hr. (given)
Direct labor cost variances
Actual units at actual cost [30,500 hrs. @ $17.25] …………………………..
$526,125
Standard units at standard cost [30,000 hrs. @ $17.00] …………………………..
510,000
Direct labor cost variance …………………………………………………………………………
$ 16,125 U
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR
Standard Costs
SH x SR
30,500 x $17.25
30,000 x $17.00
hours per hr.
hours per hr.
hours per hr.
$526,125
$510,000
Problem 21-3A (Concluded)
Part 5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
Indirect materials …………………………..
$ 45,000
$ 44,250
$ 750
F
Indirect labor ………………………………………
180,000
177,750
2,250
F
Power …………………………………………………
45,000
43,000
2,000
F
Repairs and maintenance ……………………
90,000
96,000
6,000
U
Total variable costs …………………………..
360,000
361,000
1,000
U
Fixed overhead costs
Depreciation—Building ……………………….
24,000
24,000
0
Depreciation—Machinery ……………………
5,000
F
Taxes and insurance …………………………..
F
Supervision ………………………………………..
79,000
89,000
U
Total fixed costs …………………………..
U
Volume Variance
Expected production level ……………………………………………….
75% of capacity
75% of capacity
Volume variance ……………………………………………………………..
Problem 21-4A (40 minutes)
Part 1 Direct Materials Variances
Direct materials cost variances
Actual units at actual cost [1,615,000 lbs. @ $4.10] …………………………..
$6,621,500
Standard units at standard cost [1,620,000 lbs. @ $4.00] …………………………..
6,480,000
Direct material cost variance……………………………………………………….
$ 141,500 U
Direct Materials Price and Quantity Variances
Standard Cost
SQ x SP
1,620,000 x $4.00
Part 2 Direct Labor Variances
Direct labor cost variances
Actual units at actual cost [265,000 hrs. @ $13.75] …………………………..
$3,643,750
Standard units at standard cost [270,000 hrs. @ $14.00] …………………………..
3,780,000
Direct labor cost variance ……………………………………………………….
$ 136,250 F
Direct Labor Rate and Efficiency Variances
Standard Cost
SH x SR
270,000 x $14.00
$3,780,000
(Rate variance)
(Efficiency variance)
Problem 21-4A (Continued)
Part 3 Overhead Variances
Controllable variance
Actual overhead [$2,350,000 + $2,200,000] ………………………….
$4,550,000
Budgeted overhead [at 90% capacity] ………………………………..
4,560,000
Controllable variance ……………………………………………………….
$ 10,000 F
Budgeted fixed overhead [given, at 80% capacity] ………………
$2,400,000
Fixed overhead cost applied [270,000 hrs. @ $10] ………………
2,700,000
Fixed overhead volume variance………………………………………..
$ 300,000 F
Problem 21-5AA (15 minutes)
(a) Variable overhead
Variable Overhead Spending and Efficiency Variances
Applied Overhead
SH x SVR
270,000 x $8
$2,160,000
$80,000 U
(Spending variance)
$40,000 F
(Efficiency variance)
$40,000 U
(Total variable overhead variance)
(b) Fixed overhead
$2,350,000
$2,400,000
$2,700,000
(c) Controllable variance
Variable overhead spending variance ……………………………..
$ 80,000 U
Variable overhead efficiency variance ……………………………..
Fixed overhead spending variance ………………………………….
Problem 21-6AA (45 minutes)
Part 1
Dec. 31*
Work in Process Inventory …………………………..
100,000
Direct Materials Quantity Variance …………………………..
3,000
Direct Materials Price Variance …………………………..
500
Raw Materials Inventory …………………………..
102,500
Record direct materials costs, including
the unfavorable quantity and
favorable price variances.
Dec. 31
Work in Process Inventory …………………………..
95,800
Direct Labor Rate Variance …………………………..
1,200
Direct Labor Efficiency Variance …………………………..
Factory Wages Payable …………………………..
Record direct labor costs, including
the favorable efficiency variance and
unfavorable rate variance.
Dec. 31
Work in Process Inventory …………………………..
354,000
Controllable Variance ……………………………………………………..
9,000
Volume Variance …………………………..…………………………..
12,000
Factory Overhead …………………………………………………..
375,000
Record overhead costs, including
the unfavorable volume and unfavorable
controllable variances.
Problem 21-6AA (Continued)
Part 2
Management will focus on the direct labor efficiency variance and the
overhead volume variances (volume and controllable). The controllable
overhead variance would need to be broken down into its components for
PROBLEM SET B
Problem 21-1B (60 minutes)
Part 1
Variable or Fixed Classification
Amount*
Variable sales (total divided by 20,000 units)
Sales ……………………………………………………………………………………..
$ 150.00
Variable costs (total divided by 20,000 units)
Direct materials …………………………..…………………………………………
$ 60.00
Direct labor ……………………………………………………………………………
13.00
Machinery repairs …………………………………………………………………..
2.85
Utilities (25% variable) ……………………………………………………………
2.50
Packaging ……………………………………………………………………………..
4.00
Shipping …………………………..……………………………………………………
5.80
Total variable costs ………………………………………………………………..
$ 88.15
Fixed costs
Depreciation—Machinery ……………………………………………………….
$ 250,000
Utilities (75% fixed) ………………………………………………………………..
Plant management salaries …………………………………………………….
Sales salary ……………………………………………………………………………
Advertising expense ………………………………………………………………
Entertainment expense …………………………………………………………..
90,000
Problem 21-1B (Continued)
Part 2
TOHONO COMPANY
Flexible Budgets
For Year Ended December 31, 2019
Flexible Budget
Flexible
Flexible
Variable
Amount
per Unit
Total
Fixed
Cost
Budget for
Unit Sales
of 18,000
Budget for
Unit Sales
of 24,000
Sales ……………………………….
$150.00
$2,700,000
$3,600,000
Variable costs
Direct materials ……………..
60.00
1,080,000
1,440,000
Direct labor ……………………
13.00
234,000
312,000
Machinery repairs ………….
2.85
51,300
68,400
Utilities ………………………….
2.50
45,000
60,000
Packaging ……………………..
4.00
72,000
96,000
Shipping ………………………..
5.80
104,400
139,200
Total variable …………………
88.15
1,586,700
2,115,600
Contribution margin …………
$ 61.85
1,113,300
1,484,400
250,000
250,000
150,000
150,000
140,000
140,000
Advertising expense ………
81,000
81,000
90,000
Problem 21-1B (Continued)
Part 3
Operating income increase for a 20,000 to 28,000 unit sales increase
Potential sales (units) ……………………………………………………..
28,000
Contribution margin per unit ……………………………………………
x $61.85
Total contribution margin ………………………………………………..
Potential increase in income ……………………………………………
*Alternate solution format
Unit increase …………………………………………………………………..
8,000
Units
Contribution margin per unit…………………………………………….
x $61.85
Increase in contribution margin ………………………………………..
$494,800
Since there is no increase in fixed costs, the expected increase in operating
income is the same $494,800.
Part 4
Operating income (loss) at 14,000 units
Potential sales (units) ……………………………………………………..
14,000
Contribution margin per unit ……………………………………………
x $61.85
Potential operating loss …………………………………………………..
Problem 21-2B (60 minutes)
Part 1
TOHONO COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2019
Flexible
Actual
Budget
Results
Variances*
Sales (24,000 units) ……………………..
$3,600,000
$3,648,000
$48,000
F
Variable costs
Direct materials …………………………
1,440,000
1,400,000
40,000
F
Direct labor ……………………………….
312,000
360,000
48,000
U
Machinery repairs ……………………..
68,400
60,000
8,400
F
Utilities ……………………………………..
60,000
64,000
4,000
U
Packaging …………………………………
96,000
90,000
6,000
F
Shipping …………………………………..
139,200
124,000
15,200
F
Total variable costs …………………..
2,115,600
2,098,000
17,600
F
Contribution margin …………………….
1,484,400
1,550,000
65,600
F
Fixed costs
250,000
250,000
U
Plant management salaries ……….
140,000
155,000
15,000
U
Sales salary ………………………………
160,000
162,000
2,000
U
Advertising expense ………………….
81,000
U
Salaries …………………………………….
241,000
232,000
9,000
F
100,000
10,000
U
Total fixed costs………………………..
1,157,000
45,000
U
Problem 21-2B (Continued)
Part 2
(a) Sales variance
Total
Per unit
Budgeted sales ……………………………………………………..
$3,600,000
Actual sales ……………………………………………………….
3,648,000
Sales variance (favorable) ……………………………………..
$ 48,000
Interpretation: The sales variance is favorable because the actual price was
higher than planned.
(b) Direct materials variance
Total
Per unit
Budgeted materials………………………………………………..
$1,440,000
$ 60.00
Actual materials used …………………………………………….
1,400,000
58.33*
Direct materials variance ……………………………………….
$ 40,000
$ 1.67
F
* (rounded)
Problem 21-3B (60 minutes)
Part 1
Variable costs (total divided by 15,000 units)
Per Unit
Amount
Indirect materials …………………………………
$ 1.50
Indirect labor………………………………… ……
6.00
Power………………………………………………
1.50
Repairs and maintenance………………………
3.00
Total variable costs………………………………
$12.00
Fixed costs (total)
Total
Amount
72,000
Taxes and insurance……………………………
Total fixed costs…………………………………
Problem 21-3B (Continued)
Part 2
SUNCOAST COMPANY
Flexible Overhead Budgets
For Month Ended December 31
Flexible Budget
Flexible
Flexible
Flexible
Variable
Amount
per Unit
Total
Fixed
Cost
Budget for
Unit Sales
of 13,000
Budget for
Unit Sales
of 15,000
Budget for
Unit Sales
of 17,000
Variable overhead costs
Indirect materials ……………….
$ 1.50
$ 19,500
$ 22,500
$ 25,500
Indirect labor ……………………..
6.00
78,000
90,000
102,000
Power ………………………………..
1.50
19,500
22,500
25,500
Repairs and maintenance ……
3.00
39,000
45,000
51,000
Total variable costs…………….
$12.00
156,000
180,000
204,000
Fixed overhead costs
Depreciation—Building ………
24,000
24,000
24,000
Depreciation—Machinery ……
72,000
72,000
72,000
72,000
Taxes and insurance…………..
18,000
18,000
18,000
18,000
Supervision ……………………….
66,000
66,000
66,000
Total fixed costs …………………
180,000
180,000
180,000
Total overhead …………………….
$336,000
$360,000
$384,000
Problem 21-3B (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Actual material used:
69,000 lbs. (given)
Standard quantity of materials:
15,000 units x 4.5 lb./unit = 67,500 lb.
Actual price:
$6.10/lb. (given)
Standard price:
$6.00/lb. (given)
Direct material cost variances
Actual units at actual cost [69,000 lbs. @ $6.10] ……………………..
$420,900
Standard units at standard cost [67,500 lbs. @ $6.00] …………….
405,000
Direct material cost variance …………………………………………………
$ 15,900 U
Alternate solution format
Price variance
=
AQ x (AP – SP)
=
69,000 lb. x ($6.10 – $6.00) per lb.
=
69,000 lb. x ($0.10) per lb.
=
$ 6,900 U
Quantity variance
=
(AQ – SQ) x SP
=
(69,000 – 67,500) lb. x $6.00 per lb.
=
1,500 lb. x $6.00 per lb.
=
$ 9,000 U
Price variance …………………
Quantity variance ……………
Total variance …………………