CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN) (Continued)
c.
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred…………
…
$16,680
Budgeted variable factory overhead for 3,000 hrs.* ……
…
16,500
V
ariance—unfavorable……………………………………
…
$180
Factory Overhead Cost Variance
**
22-41
V
…
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3A (FIN MAN); Prob. 7–3A (MAN) (Concluded)
Actual costs 29,480 Applied costs 28,500
($16,680 + $12,800) [3,000 × ($5.50 + $4.00)]
Balance (underapplied) 980
Alternative Computation of Overhead Variances
Factory Overhead
22-42
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
Fixed costs:
Supervisory salaries $ 20,000 $ 20,000
Depreciation of plant and
equipment 36,200 36,200
Net controllable variance—unfavorable $ 770
Volume variance—favorable:
1
The 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
Variances
22-43
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
22-44
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–5A (FIN MAN); Prob. 7–5A (MAN)
1. Actual hours provided (5 × 40 hrs.)……………………………………………
…
200
Standard hours required for the original plan*………………………………
…
186
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
22-45
…
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–1B (FIN MAN); Prob. 7–1B (MAN)
a.
Standard
Materials and
Labor Cost
b.
Price variance:
= ($5.10 per yd. – $5.00 per yd.) × 26,200 yds.
Direct Materials Cost Variance
Direct Materials
Price Variance
= (Actual Price – Standard Price) × Actual Quantity
22-46
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–1B (FIN MAN); Prob. 7–1B (MAN) (Concluded)
c.
Rate variance:
= ($11.80 – $12.00) × 1,000 hrs.*
= –$200 Favorable
Direct Labor Cost Variance
(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
Direct Labor
Rate Variance
=
22-47
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
V
ariance……………………………………
…
$ (0.10) $ 0.20
Quantity variance:
Actual quantity used……………………
…
48,000 85,100
Standard quantity used
1
………………
…
47,760 85,320
V
…
…
Total direct materials cost variance………
…
$10,940 U
Alternatively, total direct materials cost variance:
Actual cost
2
………………………………
…
$91,200 $697,820
Standard cost
3
……………………………
…
95,520 682,560
Total direct materials cost variance
…
$ (4,320) F$ 15,260 U$10,940 U
Filler Liner Total
22-48
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–2B (FIN MAN); Prob. 7–2B (MAN) (Concluded)
1. b.
Actual rate…………………………………
…
$ 14.10 $ 13.30
Standard rate………………………………
…
$ 14.00 $ 13.00
…
Direct labor rate variance……………
…
$182.50 U$ 840 U $1,022.50 U
Time variance:
…
…
Direct labor time variance……………
…
$910.00 U$(1,300) F(390) F
Total direct labor cost variance……………
…
$ 632.50 U
Alternatively, total direct labor cost variance:
Actual cost
2
………………………………… $25,732.50 $37,240.00
Standard cost
3
……………………………
…
24,640.00 37,700.00
2
$25,732.50 = 1,825 hrs. × $14.10
$37,240.00 = 2,800 hrs. × $13.30
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
22-49
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN)
a.
Price variance:
= ($6.50 per lb. – $6.40 per lb.) × 101,000 lbs.
= $10,100 Unfavorable
Quantity variance:
Direct Materials Cost Variance
= (Actual Price – Standard Price) × Actual Quantity
Direct Materials
Quantity Variance = (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials
Price Variance
22-50
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–3B (FIN MAN); Prob. 7–3B (MAN) (Continued)
b.
Rate variance:
= ($15.40 – $15.75) × 2,000 hrs.
= –$700 Favorable
Direct Labor Cost Variance
Direct Labor
Rate Variance
=(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
22-51
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
Budgeted variable factory overhead for 2,080 hrs.* ……
…
8,320
V
ariance—favorable………………………………………
…
$(120)
Factory Overhead Cost Variance
**
22-52
V
…
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
($8,200 + $12,000) [2,080 × ($4.00 + $6.00)]
Balance (overapplied) (600)
Actual Applied
Factory Factory
Overhead for Amount
Alternative Computation of Overhead Variances
Factory Overhead
Budgeted Factory
22-53
CHAPTER 22 Performance Evaluation Using Variances from Standard Costs
Prob. 22–4B (FIN MAN); Prob. 7–4B (MAN)
Normal capacity for the month 30,000
hrs.
Actual production for the month 28,500 hrs.
Budget Actual Favorable Unfavorable
Variable costs:
1
Fixed costs:
Supervisory salaries $126,000 $126,000
Depreciation of plant and
equipment 70,000 70,000
Total factory overhead cost variance—unfavorable $10,550
1
The 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
Variances
22-54
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
[28,500 × ($16.30 + $8.00)]
Balance (underapplied) 10,550
Actual Applied
Factory Factory
Overhead Overhead
Produced
Overhead for Amount
Alternative Computation of Overhead Variances
Factory Overhead
Budgeted Factory
22-55