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1393
Problem 23-3A (60 minutes)
Part 1
Variable or Fixed Classification
Amount
Variable costs (total divided by 15,000 units)
Indirect materials .............................................................................
$ 3.00
Indirect labor ....................................................................................
12.00
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
Fixed overhead costs
Depreciation—Building .....
$ 24,000
24,000
24,000
24,000
Depreciation—Mach...........
80,000
80,000
80,000
80,000
1394
Problem 23-3A (Continued)
Part 3 Direct Materials Variances
Preliminary computations
Direct material cost variances
Actual units at actual cost [91,000 lbs. @ $5.10] .....................................
$464,100
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)
=
91,000 lb. x ($5.10 - $5.00) per lb.
1395
Problem 23-3A (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
Direct labor cost variances
Actual units at actual cost [30,500 hrs. @ $17.25] ................................
$526,125
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)
=
30,500 hours x ($17.25 - $17.00) per hour
1396
Problem 23-3A (Concluded)
Part 5
ANTUAN COMPANY
Overhead Variance Report
For Month Ended October 31
Volume Variance
Expected production level .......................................................
75% of capacity
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
Fixed overhead costs
Depreciation—Building ............................
24,000
24,000
0
Depreciation—Machinery ........................
80,000
75,000
5,000
F
1397
Problem 23-4A (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
Actual Cost
AQ x AP
AQ x SP
Standard Cost
SQ x SP
Part 2 Direct Labor Variances
Direct labor cost variances
Actual units at actual cost [265,000 hrs. @ $13.75] ................................
$3,643,750
Direct Labor Rate and Efficiency Variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
1398
Problem 23-4A (Continued)
Part 3 Overhead Variances
Controllable variance
Actual overhead [$2,350,000 + $2,200,000] ...............................
$4,550,000
1399
Problem 23-5AA (15 minutes)
(a) Variable overhead
Variable Overhead Spending and Efficiency Variances
Actual Overhead
AH x AVR
AH x SVR
Applied Overhead
SH x SVR
265,000 x $8
270,000 x $8
(b) Fixed overhead
Fixed Overhead Spending and Volume Variances
Actual Overhead
Budgeted Overhead
Applied Overhead
270,000 x $10
(c) Controllable variance
Variable overhead spending variance ...................................
$ 80,000 U
1400
Problem 23-6AA (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
* Alternatively, some companies compute and record the price variance
when materials are purchased. This would yield two separate entries:
(1) Purchase of materials
(2) Issuance of materials into production
Work in Process Inventory ................................
100,000
1401
Problem 23-6AA (Continued)
Part 2
Under management by exception, the manager would first identify the largest
variances, attempt to uncover their causes, and then implement actions aimed
at correcting them. The smaller variances would be tackled after the major
problems were dealt with, if at all.
1402
PROBLEM SET B
Problem 23-1B (60 minutes)
Part 1
Variable or Fixed Classification
Amount*
Variable sales (total divided by 20,000 units)
Sales ..................................................................................................
$ 150.00
Fixed costs
Depreciation—Machinery ................................................................
$ 250,000
1403
Problem 23-1B (Continued)
Part 2
TOHONO COMPANY
Flexible Budgets
For Year Ended December 31, 2017
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
Fixed costs
Depreciation—Mach. ..........
$ 250,000
250,000
250,000
Utilities ...............................
150,000
150,000
150,000
1404
Problem 23-1B (Continued)
Part 3
Operating income increase for a 20,000 to 28,000 unit sales increase
Potential sales (units) ..............................................................
28,000
Part 4
Operating income (loss) at 14,000 units
Potential sales (units) ..............................................................
14,000
1405
Problem 23-2B (60 minutes)
Part 1
TOHONO COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2017
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
Fixed costs
Depreciation—Machinery ..............
250,000
250,000
0
Utilities ............................................
150,000
154,000
4,000
U
1406
Problem 23-2B (Continued)
Part 2
(a) Analysis of sales variance
Total
Per unit
Budgeted sales ..............................................................
$3,600,000
$150.00
(b) Analysis of direct materials variance
Total
Per unit
Budgeted materials........................................................
$1,440,000
$ 60.00
1407
Problem 23-3B (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
1408
Problem 23-3B (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
Fixed overhead costs
Depreciation—Building .........
$ 24,000
24,000
24,000
24,000
