Exercise 21–14A (25 minutes)
1.
Work in Process Inventory ………………………………………………
288,000
Direct Materials Price Variance* ………………………………………
2.
Direct Materials Quantity Variance …………………………..
24,000
1268
Exercise 21-15 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (16,000 x $4.05) ………………………….
$ 64,800
Actual quantity used x Standard price (16,000 x $4.00) ………………………
64,000
Direct materials price variance ……………………………………………………….
U
Actual quantity used x Standard price (16,000 x $4.00) ………………………
$ 64,000
Standard quantity x Standard price (15,000* x $4.00) ………………………….
60,000
Direct materials quantity variance ……………………………………………………..
U
Part 2
Direct labor rate variance:
Actual hours x Actual rate per hour (5,545 x $19.00***) ………………………
$105,355
Actual hours x Standard rate per hour (5,545 x $20.00) ………………………
Direct labor rate variance ……………………………………………………….
F
Direct labor efficiency variance:
Actual hours x Standard rate per hour (5,545 x $20.00) ………………………
$110,900
Standard hours x Standard rate per hour (5,000** x $20.00) ………………..
Direct labor efficiency variance ……………………………………………………….
$ 10,900
U
1269
Exercise 21–16 (30 minutes)
1.
October variances
Preliminary computations
Actual hours: 16,250 hours (given)
Rate and efficiency variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
Alternate solution format
Rate variance
= AH x (AR – SR)
= 16,250 hours x ($15.20 – $15.00) per hour
= 16,250 hours x $0.20 per hour
= $3,250 U
Efficiency variance
= (AH – SH) x SR
= (16,250 – 16,800) hours x $15.00 per hour
= (-550 hours) x $15.00 per hour
Rate variance ………………….
Efficiency variance ………….
Total …………………………..
1270
Exercise 21–16 (Concluded)
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
Rate and efficiency variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
22,000 x $15.25
22,000 x $15.00
18,000 x $15.00
hours per hour
hours per hour
hours per hour
2. The efficiency variance is more than 5% of actual direct labor cost
($60,000/$335,500 = 17.9%) and it will be investigated further.
For the instructor
The unfavorable labor rate variance in October means the actual rate for an hour of labor is
1271
Exercise 21–17 (20 minutes)
1. Predetermined overhead rate computations
Expected volume …………………………………………………………….
75%
Expected total overhead ………………………………………………….
$2,100,000
Expected hours ………………………………………………………………
Variable cost per hour ($1,500,000/ 375,000) …………………….
Fixed cost per hour ($600,000/ 375,000) …………………………..
Total cost per hour ($2,100,000/ 375,000) …………………………
2. Variable overhead cost variance
Variable overhead cost incurred [given] …………………………..
$1,375,000
Variable overhead cost applied [350,000 hrs. @ $4.00] ………………………
Fixed overhead cost variance
Fixed overhead cost incurred [given] ……………………………………….
$ 628,600
Fixed overhead cost applied [350,000 hrs. @ $1.60] ………………….
Fixed overhead cost variance ………………………………………………….
1272
Exercise 21–18A (20 minutes)
1.
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR
AH x SVR
Applied Overhead
SH x SVR
(Given)
340,000 x $4.00
350,000 x $4.00
hours per hour
hours per hour
Interpretation:
The $15,000 unfavorable spending variance means the actual cost of variable
overhead is more than budgeted. This unfavorable variance can occur
1273
Exercise 21–18A (continued)
2.
Fixed overhead spending and volume variances
Actual Overhead
Budgeted Overhead
Applied Overhead
(Given)
(Given)
350,000 x $1.60
hours per hour
Interpretation
The $28,600 unfavorable spending variance means actual cost of fixed
overhead is more than budgeted.
3. The controllable variance is computed as:
Variable overhead spending variance ……………………………..
$15,000 U
Variable overhead efficiency variance ……………………………..
40,000 F
Fixed overhead spending variance ………………………………….
28,600 U
Exercise 21-19 (20 minutes)
Information given
Planned units to be produced = 80% x 50,000 capacity = 40,000 units
1. Total overhead planned at 80% level (25,000 direct labor hours)
Budgeted
Cost
Ovhd.
Rate*
Fixed overhead…………………………...
$ 50,000
$ 2.00
2. Total overhead variance
Total actual overhead (given) ……………………………………………………….
$305,000
Total overhead variance ……………………………………………………….
Exercise 21–20 (30 minutes)
1. The overhead volume variance is computed as:
2. Overhead controllable variance*
Total actual overhead (given)
$305,000
Budgeted overhead
Overhead controllable variance ……………………………………………………….
1276
EX
Exercise 21-21 (25 minutes)
Preliminary calculations:
Part 1
Total actual overhead (given) …………………………
$99,250
Budgeted overhead
Overhead controllable variance……………………….
Part 2
Total budgeted fixed overhead (given) ………………
$44,400
1277
Exercise 21–21 (continued)
Part 3
JAMES CORP.
Overhead Variance Report
For Month Ended May 31
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
F
F
U
F
U
U
Volume Variance
Expected production level …………………………………………….
80% of capacity
Production level achieved …………………………………………….
90% of capacity
1278
Exercise 21-22 (25 minutes)
Preliminary calculations:
Part 1
Total actual overhead (given) …………………………
$81,700
Budgeted overhead
Part 2
Total budgeted fixed overhead (given) ………………
$48,000
1279
Exercise 21–22 (continued)
Part 3
BLAZE CORP.
Overhead Variance Report
For Month Ended March 31
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
Indirect materials ………………………
$11,250
$10,000
$1,250
F
Indirect labor …………………………..
F
U
F
F
U
U
U
Volume Variance
Expected production level ……………………………………
80% of capacity
Production level achieved ……………………………………
90% of capacity
1280
Exercise 21–23 (25 minutes)
1. and 2. Sales price and sales volume variances
Sales Actual Sales
Flexible Budget
Fixed Budget
Units 350
350
365
For the instructor
The $35,000 favorable sales price variance implies it sold computers for a higher
1281
PROBLEM SET A
Problem 21-1A (60 minutes)
Part 1
Variable or Fixed Classification
Amount*
Variable sales (total divided by 15,000 units)
Sales ……………………………………………………………………………………..
$ 200.00
Variable costs (total divided by 15,000 units)
Direct materials ……………………………………………………………………..
$ 65.00
Machinery repairs ………………………………………………………………….
Utilities ($45,000 variable) ………………………………………………………
Packaging …………………………..…………………………………………………
Shipping ………………………………………………………………………………..
7.00
Fixed costs
Depreciation—Plant equipment …………………………..………………….
$ 300,000
Utilities ($195,000 – $45,000 variable) ………………………………………
150,000
Plant management salaries …………………………………………………….
200,000
Sales salary …………………………………………………………………………..
250,000
Salaries …………………………………………………………………………………
241,000
Entertainment expense …………………………………………………………..
90,000
1282
Problem 21-1A (Continued)
Part 2
PHOENIX 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 14,000
Budget for
Unit Sales
of 16,000
Sales ……………………………….
$200.00
$2,800,000
$3,200,000
Variable costs
Direct materials ……………..
65.00
910,000
1,040,000
210,000
240,000
Fixed costs
Depreciation—Plant Equip ….
$ 300,000
300,000
300,000
Utilities ………………………….
150,000
150,000
150,000
Plant mgmt. salaries ………
200,000
200,000
200,000
Sales salary. ………………….
250,000
250,000
250,000
125,000
125,000
125,000
Entertainment expense ….
1283
Problem 21-1A (Continued)
Part 3
Operating income increase for a 15,000 to 18,000 unit sales increase
Possible sales (units) ………………………………………………………
18,000
Contribution margin per unit ……………………………………………
x $101
Total contribution margin ………………………………………………..
*Alternate solution format
Unit increase ……………………………………………………….………………………
3,000
Units
income is the same $303,000.
Part 4
Operating income (loss) at 12,000 units
Possible sales (units) ………………………………………………………
12,000
Total contribution margin ………………………………………………..
1284
Problem 21-2A (45 minutes)
Part 1
PHOENIX COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2019
Flexible
Actual
Budget
Results
Variances*
Sales (18,000 units) ……………………..
$3,600,000
$3,648,000
$48,000
F
Variable costs
Direct materials …………………………
1,170,000
1,185,000
15,000
U
270,000
278,000
U
Machinery repairs ……………………..
F
Utilities ……………………………………..
F
Packaging …………………………………
F
F
Total variable costs …………………..
U
45,000
F
Fixed costs
Depreciation—Plant equip. ………..
300,000
300,000
0
Utilities ……………………………………..
150,000
147,500
2,500
F
Plant management salaries ……….
200,000
210,000
10,000
U
Sales salary ………………………………
250,000
268,000
18,000
U
Advertising expense ………………….
125,000
132,000
U
Salaries …………………………..………..
241,000
241,000
0
U
Total fixed costs………………………..
U
1285
Problem 21-2A (Continued)
Part 2
(a) Sales variance
Total
Per unit
Budgeted sales ……………………………………………………..
$3,600,000
$200.00
(b) Direct materials variance
Total
Per unit
Budgeted materials………………………………………………..
$1,170,000
$ 65.00
Direct materials variance ……………………………………….
$ 0.83
U
Interpretation:
The direct materials variance is unfavorable for two possible reasons. (1)
1286
Problem 21-3A (60 minutes)
Part 1
Variable or Fixed Classification
Amount
Variable costs (total divided by 15,000 units)
Indirect materials …………………………………………………………………..
$ 3.00
Indirect labor …………………………………………………………………………
Power ……………………………………………………………………………………
Repairs and maintenance ………………………………………………………
Fixed costs (per month)
$ 24,000
Taxes and insurance ……………………………………………………………..
Supervision …………………………………………………………………………..
Part 2
ANTUAN COMPANY
Flexible Overhead Budgets
For Month Ended October 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 ……………
$ 3.00
$ 39,000
$ 45,000
$ 51,000
Indirect labor ………………….
12.00
156,000
180,000
204,000
Repairs and maint. ………….
Total variable costs…………
312,000
360,000
408,000
Fixed overhead costs
Supervision ……………………
Total fixed costs ……………..