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
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 ……………
$ 39,000
$ 45,000
$ 51,000
Indirect labor ………………….
Power …………………………..
39,000
45,000
51,000
Repairs and maint. ………….
Total variable costs…………
Fixed overhead costs
Depreciation—Building …..
$ 24,000
24,000
24,000
24,000
Depreciation—Mach.……….
80,000
80,000
80,000
80,000
Taxes and insurance……….
12,000
12,000
12,000
Supervision ……………………
Total fixed costs ……………..
Power ……………………………………………………………………………………
Repairs and maintenance ………………………………………………………
Total variable costs ……………………………………………………………….
Fixed costs (per month)
Depreciation—Building ………………………………………………………….
$ 24,000
Depreciation—Machinery ……………………………………………………….
Taxes and insurance ……………………………………………………………..
Supervision …………………………………………………………………………..
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
Standard units at standard cost [90,000 lbs. @ $5.00] ………………………
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)
=
91,000 lb. x ($5.10 – $5.00) per lb.
=
91,000 lb. x ($0.10) per lb.
=
$9,100 U
Quantity variance
=
(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
Price variance …………………
$ 9,100 U
Quantity variance …………….
5,000 U
Total variance ………………….
$14,100 U
Actual material used:
Standard quantity of materials:
Actual price:
Standard price:
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
Standard units at standard cost [30,000 hrs. @ $17.00] …………………………..
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)
=
30,500 hours x ($17.25 – $17.00) per hour
=
30,500 x $0.25 per hour
=
$7,625 U
Efficiency variance
=
(AH – SH) x SR
=
(30,500 – 30,000) hours x $17.00 per hour
=
500 hours x $17.00 per hour
=
$8,500 U
Rate variance ………………….
Efficiency variance ………….
Total …………………………..
Actual rate:
$17.25/hr. (given)
Standard rate:
$17.00/hr. (given)
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
Power …………………………………………………
45,000
43,000
2,000
F
Repairs and maintenance ……………………
U
Total variable costs …………………………..
360,000
361,000
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
75% of capacity
Volume variance ……………………………………………………………..
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
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
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
Budgeted overhead [at 90% capacity] ………………………………..
Controllable variance ……………………………………………………….
$ 10,000 F
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
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
Fixed overhead spending variance ………………………………….
(Spending variance)
(Efficiency variance)
(Total variable overhead variance)
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
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 ……………………………………………………….
Direct Materials Price Variance …………………………..
Accounts Payable……………………………………………………….
(2) Issuance of materials into production
Work in Process Inventory …………………………..
100,000
Direct Materials Quantity Variance …………………………..
Raw Materials Inventory …………………………..
103,000
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
Advertising expense ………………………………………………………………
Variable costs (total divided by 20,000 units)
Machinery repairs …………………………………………………………………..
Total variable costs ………………………………………………………………..
$ 88.15
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
140,000
140,000
Sales salary. ………………….
160,000
160,000
Advertising expense ………
Salaries …………………………
241,000
241,000
Total fixed costs…………….
$1,112,000
13.00
234,000
312,000
Packaging ……………………..
1,113,300
1,484,400
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
Potential operating loss …………………………………………………..
Total contribution margin ………………………………………………..
Potential increase in income ……………………………………………
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
140,000
155,000
U
160,000
162,000
U
104,000
23,000
U
90,000
U
U
F
Utilities ……………………………………..
U
F
F
F
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
Actual materials used …………………………………………….
Direct materials variance ……………………………………….
$ 1.67
F
Sales variance (favorable) ……………………………………..
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
Total fixed costs…………………………………
Total variable costs………………………………
1408
Problem 23-3B (Continued)
Part 2
SUNCOAST COMPANY
Flexible Overhead Budgets
For Month Ended December 31
Flexible Budget
Flexible
Flexible
Flexible
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 ……………….
$ 19,500
$ 22,500
$ 25,500
Fixed overhead costs
Depreciation—Building ………
$ 24,000
24,000
24,000
24,000
Depreciation—Machinery ……
72,000
72,000
72,000
Taxes and insurance…………..
18,000
18,000
18,000
Supervision ……………………….
Total fixed costs …………………
$180,000
Indirect labor ……………………..
78,000
90,000
Power ………………………………..
19,500
22,500
25,500
Repairs and maintenance ……
Total variable costs…………….