CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–15
a.
Direct labor hours 9,000 10,000 11,000
b. Overhead applied at actual production:
Actual hours…………………………………………………………………………
…
9,000
…
*Total factory overhead rate to be applied to production:
V
ariable factory overhead………………………………………………… $ 4.50
WIKI WIKI COMPANY
Monthly Factory Overhead Cost Budget—Fabrication Department
23-21
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–16
Variable factory overhead controllable variance:
23-22
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–16 (Concluded)
Actual costs 352,000 Applied costs 350,000
Balance (underapplied) 2,000
Alternative Computation of Overhead Variances
Factory Overhead
23-23
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–17
a. Controllable variance:
Actual variable factory overhead
($782,000 – $240,000)…………………………… $542,000
b. Volume variance:
V
olume at 100% of normal capacity…………………………… 100,000
V
23-24
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–17 (Concluded)
Actual costs 782,000 Applied costs 777,000
Balance (underapplied) 5,000
Alternative Computation of Overhead Variances
Factory Overhead
*
23-25
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–18
A correct determination of the factory overhead cost variances is as follows:
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred…………………
…
$458,000
Budgeted variable factory overhead for 132,000
23-26
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–18 (Concluded)
Actual costs 952,000 Applied costs 963,600
($458,000 + $494,000) [($3.50 + $3.80) × 132,000]
Cost Variance
Alternative Computation of Overhead Variances
Factory Overhead
23-27
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–19
Productive capacity for the month 25,000 hrs.
Actual productive capacity used for the month 22,000 hrs.
Budget
(at actual
production) Actual Favorable Unfavorable
Variable factory overhead costs:1
Total variable factory
overhead cost $ 85,800 $ 86,700
Fixed factory overhead costs:
1The budgeted variable factory overhead costs are determined by multiplying
22,000 hours by the variable factory overhead cost rate for each variable cost
category. These rates are determined by dividing each budgeted amount
(estimated at the beginning of the month) by the planned (budgeted) volume
of 20,000 hours. Thus, for example:
TANNIN PRODUCTS INC.
Factory Overhead Cost Variance Report—Trim Department
For the Month Ended July 31, 2014
Variances
23-28
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–19 (Concluded)
Actual costs 216,700 Applied costs 200,200
Balance (underapplied) 16,500 [22,000 × ($3.90* + $5.20)]
Alternative Computation of Overhead Variances
Factory Overhead
23-29
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–20
a. Materials1118,825
b. Work in Process197,000
Ex. 23–21
31 Work in Process1198,000
Mar.
23-30
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–22
Sales $868,000
Favorable Unfavorable
Less variances from standard cost:
Direct materials price $ — $ 1,680
GRIGGS COMPANY
Income Statement
For the Month Ended December 31, 2014
23-31
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–23
a. and b.
Average computer response X A measure of the speed of the
Maintenance dollars divided X A driver of the ordering system’s
by hardware investment reliability and downtime. The
maintenance dollars should be
divided by the amount of hardware
in order to facilitate comparison
Number of orders per X This measure is related to the
warehouse employee capacity of the warehouse relative
to the demands placed upon it.
This relationship will impact the
delivery cycle time.
Explanation
Input
Measure
Output
Measure
23-32
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Ex. 23–24
a. Possible Input Measures
Registration staffing per student
Technology investment per period for registration process
Training hours per registration personnel
Amount of faculty staffing
Possible Output Measures
Cycle time for a student to register for classes
Number of times a course is unavailable
Number of separate registration events or steps (log-ons or line waits)
per student
Number of times a replacement course was used by a student
Number of registration errors
b. Alpha University is interested in not only the efficiency of the process but
also the quality of the process. This means that the process must meet multiple
23-33
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–1A
a. Standard
Materials and
Labor Cost
per Faucet
b.
Price variance:
Quantity variance:
Total direct materials cost variance:
= (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials
Quantity Variance
PROBLEMS
Direct Materials Cost Variance
Direct Materials
Price Variance
= (Actual Price – Standard Price) × Actual Quantity
Direct Materials
Cost Variance =Direct Materials Price Variance +
Direct Materials Quantity Variance
23-34
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–1A (Concluded)
c.
Rate variance:
Time variance:
Total direct labor cost variance:
Direct Labor Cost Variance
Direct Labor
Rate Variance
Direct Labor
Time Variance
=(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
× Standard Rate per Hour
Direct Labor
Cost Variance = Direct Labor Rate Variance + Direct Labor Time Variance
23-35
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–2A
1. a.
Direct Materials Variance
Price variance:
Actual price……………………………………… $ 7.33 $ 1.35
Standard price…………………………………
…
7.25 1.40
Quantity variance:
Actual quantity used…………………………
…
140,300 188,000
…
Alternatively, total direct materials cost variance:
Actual cost 2……………………………………
…
$1,028,399 $253,800
Cocoa Sugar Total
23-36
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–2A (Concluded)
1. b.
Direct Labor Variance
Rate variance:
Actual rate…………………………………
…
$ 15.25 $ 15.80
Time variance:
Actual time…………………………………
…
2,360 6,120
…
Alternatively, total direct labor cost variance:
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 is
Chocolate Chocolate Total
Dark Light
23-37
…
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–3A
a.
Price variance:
Quantity variance:
Total direct materials cost variance:
Direct Materials Cost Variance
Direct Materials
Cost Variance =
Direct Materials
Price Variance
Direct Materials
Quantity Variance (Actual Quantity – Standard Quantity) × Standard Price
Direct Materials Price Variance +
Direct Materials Quantity Variance
= (Actual Price – Standard Price) × Actual Quantity
=
23-38
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–3A (Continued)
b.
Rate variance:
Time variance:
Total direct labor cost variance:
Direct Labor
Cost Variance
=
Direct Labor Cost Variance
Direct Labor
Rate Variance
Direct Labor
Time Variance
=
(Actual Rate per Hour – Standard Rate per Hour)
× Actual Hours
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
× Standard Rate per Hour
Direct Labor Time Variance + Direct Labor Rate Variance
23-39
CHAPTER 23 Performance Evaluation Using Variances from Standard Costs
Prob. 23–3A (Continued)
c.
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred……………………
…
$16,800
Factory Overhead Cost Variance
23-40