CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-5A
1. Actual hours provided (5 × 40 hrs.)……………………………………………
…
200
Standard hours required for the original plan*………………………………
…
186
Labor time difference……………………………………………………………
…
14
×
Standard labor rate……………………………………………………………… $32
Direct labor time variance—unfavorable……………………………………… $448
4,650 lines
25 lines per hr.
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
Difference…………………………………………………………………………… $ 8
× Actual hours provided (5 × 40 hrs.)…………………………………………
…
200
Direct labor rate variance—unfavorable………………………………………
…
$1,600
The labor cost variance is $768 unfavorable [($832) favorable time variance +
$1,600 unfavorable rate variance].
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
Standard hours required for the actual results*……………………………
…
226
Labor time difference……………………………………………………………
…
14
×
Standard labor rate……………………………………………………………… $32
Direct labor time variance—unfavorable……………………………………… $448
*
From part (2) above
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
=* 186 hrs.
×
×
×
…
…
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-1B
a. Standard
Materials and
Labor Cost
per Unit
Direct materials ($5.00 × 5.0 yds.)……………………………………………
…
$25.00
Direct labor [$12.00 × (12 min. ÷ 60 min.)]…………………………………
…
2.40
$27.40
Quantity variance:
= (26,200 yds. – 26,100 yds.*) × $5.00 per yd.
= $500 Unfavorable
=
Direct Materials
Quantity Variance
(Actual Quantity – Standard Quantity) × Standard Price
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-1B (Concluded)
c.
Rate variance:
Time variance:
= (1,000 hrs. – 1,044 hrs.*) × $12.00 per hour
= $(528) Favorable
*(12 min. ÷ 60 min.) × 5,220
Total direct labor cost variance:
Direct Labor Cost Variance
(Actual Direct Labor Hours – Standard Direct Labor
Hours) × Standard Rate per Hour
Direct Labor
Time Variance
=
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-2B
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
× Actual quantity…………………………
…
48,000 85,100
Direct materials price variance……
…
$ (4,800) F$17,020 U $12,220 U
Quantity variance:
48,000 85,100
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
1
47,760 = (4.0 lb. × 4,400 actual production of women’s coats) + (5.2 lb. × 5,800 actual production of
Filler Liner Total
××
V
…
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-2B (Concluded)
1. b.
Direct Labor Variance
Rate variance:
Actual rate…………………………………
…
$ 14.10 $ 13.30
Standard rate………………………………
…
14.00 13.00
V
ariance……………………………………
…
$ 0.10 $ 0.30
× Actual time………………………………
…
1,825 2,800
Direct labor rate variance……………
…
$182.50 U$ 840 U $1,022.50 U
Time variance:
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
Total direct labor cost variance……
…
$ 1,092.50 U$ (460.00) F$ 632.50 U
1
1,760 = 0.40 hr. × 4,400 actual production of women’s coats
2,900 = 0.50 hr. × 5,800 actual production of men’s coats
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
Coats Coats Total
Women’s Men’s
××
…
V
…
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-3B
a.
Price variance:
= ($7.30 per lb. – $7.25 per lb.) × 252,500 lb.
= $12,625 Unfavorable
Total direct materials cost variance:
= $12,625 Unfavorable + $18,125 Unfavorable
= $30,750 Unfavorable
b.
Rate variance:
Time variance:
= (5,000 hrs. – 5,200 hrs.) × $17.00 per hour
= $(3,400) Favorable
Total direct labor cost variance:
Direct Labor Cost Variance
Direct Labor
Time Variance
=(Actual Direct Labor Hours – Standard Direct Labor
Hours) × Standard Rate per Hour
Direct Materials
Price Variance
Direct Materials Cost Variance
= (Actual Price – Standard Price) × Actual Quantity
Direct Materials
Cost Variance =Direct Materials Price Variance +
Direct Materials Quantity Variance
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-3B (Concluded)
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred…………
…
$40,000
Less budgeted variable factory overhead
for 5,200 hrs.* ………………………………………………
…
41,600
V
ariance—favorable………………………………………
…
$(1,600)
Fixed factory overhead volume variance:
10,400 units × 0.5 hr.
5,200 hrs. × $8.00
Actual costs 115,000 Applied costs 119,600
($40,000 + $75,000) [5,200 × ($8.00 + $15.00)]
Balance (overapplied) 4,600
Actual Applied
Factory Factory
V
*
**
c.
Factory Overhead Cost Variance
Overhead for Amount
Alternative Computation of Overhead Variances
Factory Overhead
Budgeted Factory
**
V
…
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-4B
Normal capacity for the month 30,000
hrs.
Actual production for the month 28,500 hrs.
Actual Budget Unfavorable (Favorable)
Fixed costs:
Supervisory salaries $126,000 $126,000
Depreciation of plant and
Net controllable variance—favorable $ (1,450)
Volume variance—unfavorable:
Idle hours at the standard rate for
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
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-4B (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
$489,000 ÷ 30,000 hrs. = $16.30
$240,000 ÷ 30,000 hrs. = $8.00
Produced
Overhead for Amount
Alternative Computation of Overhead Variances
Factory Overhead
Budgeted Factory
*
CHAPTER 23 Evaluating Variances from Standard Costs
Prob. 23-5B
1. Actual hours provided (3 × 40 hrs.)……………………………………………
…
120
Standard hours required for the original plan*………………………………
…
117
2. Actual hours provided (3 × 40 hrs.)……………………………………………
…
120
Standard hours required for the actual results*……………………………… 127
Labor time difference……………………………………………………………… (7)
× Standard labor rate………………………………………………………………
…
$23
Direct labor time variance—favorable…………………………………………
…
$(161)
88,900 lines
700 lines per hr.
3. Actual labor rate……………………………………………………………………
…
$30
Standard labor rate………………………………………………………………… 23
…
…
4. Actual hours provided (4 × 40 hrs.)……………………………………………
…
160
Standard hours required for the actual results………………………………
…
127
Labor time difference……………………………………………………………… 33
× Standard labor rate………………………………………………………………
…
$23
Direct labor time variance—unfavorable………………………………………
…
$ 759
5. The bonus is the better approach by $80. The direct labor cost variance for
paying the bonus was $679 unfavorable which is the sum of the time variance
6. The labor rate and time variances fail to consider the number of errors in the
report from typist fatigue. A report that has many errors will require significant
time for correction at a later date. In addition, report errors can cause doctors
to draw incorrect conclusions from the test analyses. Thus, managers should
consider not only the efficiency of doing the work but also the quality of the
work.
* = 127 hrs.
…
…
Part A
2. Selling price…………………………………………………………
…
$100.00
Less variable costs per case:
Direct materials…………………………………………………
…
$17.00
Direct labor………………………………………………………
…
7.20
Utilities [see part (1)]……………………………………………
…
0.20
Selling expenses…………………………………………………
…
20.00
Total variable costs per case…………………………………
…
44.40
Contribution margin per case……………………………………
…
$ 55.60
3. Total fixed costs:
Utilities [see part (1)]…………………………………………………………
…
$ 500
4.
$19,460
$55.60
Break-Even Sales (units) =
Break-Even Sales (units) = = 350 cases
Fixed Costs
Unit Contribution Margin
COMPREHENSIVE PROBLEM 5
Variable Cost per Unit1. = Difference in Total Cost
Difference in Production
=Variable Cost per Unit = $0.20 per case
$740 – $600
1,200 cases – 500 cases
CHAPTER 23 Evaluating Variances from Standard Costs
Comp. Prob. 5 (Continued)
Part B
5.
Cases
Expected cases to be sold 1,500
6.
Cream Natural
Base Oils Bottles Total
(oz.) (oz.) (bottles)
Units required for production 137,500 41,250 16,500
Plus desired ending inventory 1,000 360 240
Total units required 138,500 41,610 16,740
7.
Mixing Filling Total
Hours required for production of:
Hand and body lotion 458 115
Filling: (1,375 cases × 5 min.) ÷ 60 min. = 115 hrs.
Direct Labor Cost Budget
For the Month Ended August 31
Genuine Spice Inc.
Direct Materials Purchases Budget
For the Month Ended August 31
Genuine Spice Inc.
For the Month Ended August 31
Production Budget
Genuine Spice Inc.
23
1
21