1287
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] ………………………
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
$ 9,100 U
5,000 U
$14,100 U
1288
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] …………………………..
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR
Standard Costs
SH x SR
Alternate solution format
=
AH x (AR – SR)
=
30,500 hours x ($17.25 – $17.00) per hour
=
30,500 x $0.25 per hour
=
$7,625 U
=
(AH – SH) x SR
=
(30,500 – 30,000) hours x $17.00 per hour
=
500 hours x $17.00 per hour
=
$8,500 U
1289
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 …………………………..
F
Indirect labor ………………………………………
2,250
F
Power …………………………………………………
45,000
43,000
F
Repairs and maintenance ……………………
U
Total variable costs …………………………..
1,000
U
Fixed overhead costs
Depreciation—Building ……………………….
24,000
24,000
0
Depreciation—Machinery ……………………
80,000
75,000
5,000
F
Taxes and insurance …………………………..
12,000
11,500
F
Supervision ………………………………………..
U
Total fixed costs …………………………..
U
Volume Variance
Expected production level ……………………………………………….
75% of capacity
75% of capacity
Volume variance ……………………………………………………………..
1290
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
SQ x SP
Standard Cost
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
1291
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] ………………………………..
Controllable variance ……………………………………………………….
$ 10,000 F
Fixed overhead volume variance
Budgeted fixed overhead [given, at 80% capacity] ………………
$2,400,000
Fixed overhead cost applied [270,000 hrs. @ $10] ………………
Fixed overhead volume variance………………………………………..
$ 300,000 F
1292
Problem 21-5AA (15 minutes)
(a) Variable overhead
Variable Overhead Spending and Efficiency Variances
Applied Overhead
SH x SVR
(b) Fixed overhead
Fixed Overhead Spending and Volume Variances
Budgeted Overhead
Applied Overhead
(c) Controllable variance
Variable overhead spending variance ……………………………..
$ 80,000 U
Variable overhead efficiency variance ……………………………..
Fixed overhead spending variance ………………………………….
1293
Problem 21-6AA (45 minutes)
Part 1
Dec. 31*
Work in Process Inventory …………………………..
100,000
Direct Materials Quantity Variance …………………………..
3,000
Dec. 31
Work in Process Inventory …………………………..
95,800
Direct Labor Rate Variance …………………………..
1,200
Dec. 31
Work in Process Inventory …………………………..
354,000
Controllable Variance ……………………………………………………..
9,000
Volume Variance …………………………..…………………………..
12,000
* Alternatively, some companies compute and record the price variance
when materials are purchased. This would yield two separate entries:
(1) Purchase of materials
Raw Materials Inventory ……………………………………………………….
103,000
Direct Materials Price Variance …………………………..
500
Accounts Payable……………………………………………………….
102,500
(2) Issuance of materials into production
Work in Process Inventory …………………………..
100,000
Direct Materials Quantity Variance …………………………..
Raw Materials Inventory …………………………..
103,000
1294
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
1295
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
Machinery repairs …………………………………………………………………..
Utilities (25% variable) ……………………………………………………………
Packaging ……………………………………………………………………………..
Fixed costs
Depreciation—Machinery ……………………………………………………….
$ 250,000
Utilities (75% fixed) ………………………………………………………………..
150,000
Plant management salaries …………………………………………………….
140,000
Advertising expense ………………………………………………………………
Salaries ………………………………………………………………………………….
241,000
Entertainment expense …………………………………………………………..
90,000
1296
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
13.00
234,000
312,000
Machinery repairs ………….
Packaging ……………………..
Total variable …………………
1,113,300
1,484,400
Fixed costs
Depreciation—Mach. ……….
$ 250,000
250,000
250,000
Utilities ………………………….
150,000
150,000
150,000
Plant mgmt. salaries ………
140,000
140,000
140,000
Advertising expense ………
Salaries …………………………
241,000
241,000
241,000
Entertainment expense ….
$1,112,000
1297
Problem 21-1B (Continued)
Part 3
Operating income increase for a 20,000 to 28,000 unit sales increase
Potential sales (units) ……………………………………………………..
28,000
Total contribution margin ………………………………………………..
Potential increase in income ……………………………………………
*Alternate solution format
Unit increase …………………………………………………………………..
8,000
Units
Contribution margin per unit…………………………………………….
Increase in contribution margin ………………………………………..
Part 4
Operating income (loss) at 14,000 units
Potential sales (units) ……………………………………………………..
14,000
Potential operating loss …………………………………………………..
1298
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
312,000
360,000
48,000
U
F
U
F
F
F
1,484,400
1,550,000
65,600
F
Fixed costs
Depreciation—Machinery …………..
250,000
250,000
0
Utilities ……………………………………..
150,000
154,000
4,000
U
Plant management salaries ……….
140,000
155,000
15,000
U
Sales salary ………………………………
160,000
162,000
U
104,000
U
Salaries …………………………………….
241,000
232,000
F
90,000
U
Total fixed costs………………………..
U
1299
Problem 21-2B (Continued)
Part 2
(a) Sales variance
Total
Per unit
Budgeted sales ……………………………………………………..
$3,600,000
$150.00
Sales variance (favorable) ……………………………………..
(b) Direct materials variance
Total
Per unit
Budgeted materials………………………………………………..
$1,440,000
$ 60.00
Actual materials used …………………………………………….
$ 1.67
F
1300
Problem 21-3B (60 minutes)
Part 1
Variable costs (total divided by 15,000 units)
Per Unit
Amount
Indirect materials …………………………………
$ 1.50
Fixed costs (total)
Total
Amount
Depreciation—Building…………………………
$ 24,000
1301
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
Power ………………………………..
19,500
22,500
25,500
Repairs and maintenance ……
Total variable costs…………….
Fixed overhead costs
Depreciation—Building ………
$ 24,000
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 ……………………….
Total fixed costs …………………
$180,000
Total overhead …………………….
$336,000
$360,000
$384,000
1302
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
Direct Materials Price and Quantity Variances
Standard Costs
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
=
(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 …………………