Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1327
Problem 21-6AA (45 minutes)
Part 1
a.
Dec. 31*
Work in Process Inventory ………………………..
100,000
Direct Materials Quantity Variance …………….
3,000
b.
Dec. 31
Work in Process Inventory ………………………..
95,800
Direct Labor Rate Variance ………………………..
1,200
c.
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 ………………………………
102,500
(2) Issuance of direct materials into production
Work in Process Inventory …………………………..
103,000
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1328
Problem 21-6AA (continued)
Part 2
Management will focus on three variances that exceed $5,000:
▪ Direct labor efficiency variance
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1329
PROBLEM SET B
Problem 21-1B (60 minutes)
Part 1
Variable or Fixed Classification
Amount*
Variable sales (divided by 20,000 units)
Sales ………………………………………………………..
$ 150.00
Variable costs (divided by 20,000 units)
Direct materials ………………………………………..
Direct labor ………………………………………………
Sales staff commissions …………………………..
Shipping …………………………………………………..
Total variable costs ………………………………….
$ 88.15
Fixed costs
Depreciation—Machinery ………………………….
$ 250,000
Supervisory salaries …………………………………
140,000
Sales staff salaries …………………………………..
160,000
Administrative salaries …………………………….
Depreciation—Office equipment ……………….
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1330
Problem 21-1B (Continued)
Part 2
TOHO COMPANY
Flexible Budgets
For Year Ended December 31
Variable
Amount
per Unit
Total
Fixed
Cost
Flexible Budget for
Unit Sales of
18,000
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
Total variable costs ……….
88.15
1,113,300
1,484,400
Fixed costs
Depreciation—Mach. ……….
$ 250,000
250,000
250,000
Supervisory salaries ……..
140,000
140,000
140,000
160,000
160,000
160,000
Depreciation—Office equip. ..
Total fixed costs ……………
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1331
Problem 21-1B (Continued)
Part 3
Income statement for sales of 28,000 units
TOHO COMPANY
Budgeted Income Statement
For Year Ended December 31
Sales (in units) …………………………..……………………
28,000
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1332
Problem 21-2B (60 minutes)
TOHO COMPANY
Flexible Budget Performance Report
Flexible
Actual
For Year Ended December 31
Budget
(24,000 units)
Results
(24,000 units)
Variances*
Sales ……………………………………….
$3,600,000
$3,648,000
$48,000
F
Variable costs
1,440,000
40,000
F
U
F
F
Total variable costs ……………….
F
Contribution margin ………………..
1,484,400
1,614,000
129,600
F
Fixed costs
Depreciation—Machinery ………
250,000
250,000
0
Supervisory salaries ……………..
140,000
219,000
79,000
U
160,000
U
U
Total fixed costs ……………………
U
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1333
Problem 21-3B (60 minutes)
Part 1
SUNCOAST COMPANY
Flexible Overhead Budgets
For Month Ended
December 31
Variable
Amount
per Unit
Total
Fixed
Cost
Flexible Budget for Unit Sales of
65%
75%
85%
Production (in units) ……….
13,000
15,000
17,000
Variable overhead costs
Indirect labor ………………..
78,000
90,000
Power …………………………..
19,500
22,500
25,500
Maintenance …………………
Fixed overhead costs
Depreciation—Building …
$ 24,000
24,000
24,000
24,000
Depreciation—Mach. ……..
72,000
72,000
72,000
72,000
Supervisory salaries ……..
Total fixed overhead ……..
$180,000
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1334
Problem 21-3B (Continued)
Part 2 Direct Materials Variances
Preliminary computations
Actual quantity ………………………………
69,000 lbs. (given)
Standard quantity…………………………..
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 quantity and price [69,000 lbs. @ $6.10] …………………….
$420,900
Standard quantity and price [67,500 lbs. @ $6.00] …………………
Direct Materials Price and Quantity Variances
Actual Costs
AQ x AP
AQ x SP
Standard Costs
SQ x SP
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 …………..
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1335
Problem 21-3B (Continued)
Part 3 Direct labor variances
Preliminary computations
Actual quantity ……………………..
Standard quantity………………….
Actual rate …………………………...
Standard rate ………………………..
Direct labor cost variances
Actual quantity and rate [22,800 hrs. @ $12.30] …………………….
$280,440
Standard quantity and rate [22,500 hrs. @ $12.00] ………………..
Direct Labor Rate and Efficiency Variances
Actual Costs
AH x AR
AH x SR
Standard Costs
SH x SR
Alternate solution format
Rate variance
=
AH x (AR – SR)
=
22,800 hours x ($12.30 – $12.00) per hour
=
22,800 x $0.30 per hour
=
$ 6,840 U
Efficiency variance
=
(AH – SH) x SR
=
(22,800 – 22,500) hours x $12.00 per hour
=
300 hours x $12.00 per hour
=
$ 3,600 U
Rate variance …………..
Efficiency variance …..
Total ………………………..
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1336
Problem 21-3B (Concluded)
Part 4
SUNCOAST COMPANY
Overhead Variance Report
For Month Ended December 31
Production Level
Expected …………………………………….
75% of capacity
Actual …………………………………………
75% of capacity
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
Indirect materials ………………………
F
Indirect labor …………………………....
90,000
82,260
7,740
F
Power ……………………………………….
22,500
23,100
U
Maintenance …………………………..…
U
Total variable overhead costs ……
6,240
F
Fixed overhead costs
Depreciation—Building ……………..
24,000
24,000
0
Depreciation—Machinery …………..
72,000
75,000
3,000
U
Taxes and insurance …………………
18,000
16,500
1,500
F
Supervisory salaries ………………….
66,000
66,000
0
Total fixed overhead costs ………..
180,000
181,500
U
F
Volume Variance
Budgeted (flexible) overhead ………
Total overhead variance ………………
F
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1337
Problem 21-4B (50 minutes)
Part 1 Direct Materials Variances
Direct materials variances
Actual quantity and actual price [1,000,000 lbs. @ $4.25] ……
$4,250,000
Standard quantity and standard price [1,050,000 lbs. @ $4.00] ..
Direct Materials Price and Quantity Variances
Actual Cost
AQ x AP
AQ x SP
Standard Cost
SQ x SP
$200,000 F
Part 2 Direct Labor Variances
Direct labor variances
Actual quantity and actual rate [250,000 hrs. @ $7.75] ……….
$1,937,500
Standard quantity and standard rate [252,000 hrs. @ $8.00] ……
Direct Labor Rate and Efficiency Variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
Wild and Shaw, Financial & Managerial Accounting 9e Solutions Manual: Chapter 21
1338
Problem 21-4B (Continued)
Part 3 Overhead Variances
Overhead controllable variance
Actual total overhead [$1,960,000 + $1,200,000]
$3,160,000
Budgeted total overhead [at 70% capacity] …………..
Fixed overhead volume variance
Budgeted total overhead [at 70% capacity] …………..
$3,276,000
Standard overhead applied [252,000 hrs. @ $12] …..