Accounting Chapter 23 Homework Quantity Variance Actual Quantity Used Standard Quantity

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3A (Continued)

c.

Variable factory overhead controllable variance:

$16,680

Fixed factory overhead volume variance:

Normal capacity at 100%……………………………………… 3,200 hrs.

Factory Overhead Cost Variance

23-41

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3A (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

23-42

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–4A

Normal capacity for the month 8,400

hrs.

Actual production for the month 8,860 hrs.

Budget Actual Favorable Unfavorable

Variable costs:

1

Indirect factory wages $ 31,896 $ 32,400 $ 504

Fixed costs:

Supervisory salaries $ 20,000 $ 20,000

Depreciation of plant and

equipment 36,200 36,200

Insurance and property taxes 15,200 15,200

Net controllable variance—unfavorable $ 770

Volume variance—favorable:

Excess hours used over normal at the standard

TIGER EQUIPMENT INC.

Factory Overhead Cost Variance Report—Welding Department

For the Month Ended May 31

Variances

23-43

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–4A (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

23-44

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–5A

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

23-45

…

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–1B

a. Standard

Materials and

Labor Cost

per Unit

b.

Price variance:

Quantity variance:

Total direct materials cost variance:

= (Actual Price – Standard Price) × Actual Quantity

Direct Materials Price Variance +

Direct Materials Quantity Variance

(Actual Quantity – Standard Quantity) × Standard Price

Direct Materials Cost Variance

Direct Materials

Price Variance

=

Direct Materials

Cost Variance =

Direct Materials

Quantity Variance

23-46

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–1B (Concluded)

c.

Rate variance:

Time variance:

Total direct labor cost variance:

=

Direct Labor

Cost Variance = Direct Labor Rate Variance + Direct Labor Time Variance

Direct Labor Cost Variance

(Actual Direct Labor Hours – Standard Direct Labor Hours)

× Standard Rate per Hour

(Actual Rate per Hour – Standard Rate per Hour)

× Actual Hours

Direct Labor

Rate Variance

Direct Labor

Time Variance

=

23-47

CHAPTER 23 Performance Evaluation Using 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

Quantity variance:

Actual quantity used……………………

…

48,000 85,100

Standard quantity used

1

………………

…

47,760 85,320

…

Alternatively, total direct materials cost variance:

Actual cost

2

………………………………

…

$91,200 $697,820

1

47,760 = (4.0 lbs. × 4,400 actual production of women’s coats) + (5.2 lbs. × 5,800 actual production of

of men’s coats)

Filler Liner Total

23-48

CHAPTER 23 Performance Evaluation Using 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

Time variance:

Actual time…………………………………

…

1,825 2,800

Standard time

1

……………………………

…

1,760 2,900

V

…

Alternatively, total direct labor cost variance:

Actual cost

2

………………………………… $25,732.50 $37,240.00

…

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

23-49

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3B

a.

Price variance:

Quantity variance:

Total direct materials cost variance:

Direct Materials Cost Variance

= (Actual Price – Standard Price) × Actual Quantity

Direct Materials

Cost Variance =Direct Materials Price Variance +

Direct Materials Quantity Variance

Direct Materials

Quantity Variance = (Actual Quantity – Standard Quantity) × Standard Price

Direct Materials

Price Variance

23-50

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3B (Continued)

b.

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 Rate Variance + Direct Labor Time Variance

Direct Labor

Cost Variance

23-51

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3B (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

Factory Overhead Cost Variance

**

23-52

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–3B (Concluded)

Actual costs 20,200 Applied costs 20,800

($8,200 + $12,000) [2,080 × ($4.00 + $6.00)]

Balance (overapplied) (600)

Alternative Computation of Overhead Variances

Factory Overhead

23-53

CHAPTER 23 Performance Evaluation Using Variances from Standard Costs

Prob. 23–4B

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

Insurance and property taxes 44,000 44,000

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

23-54

CHAPTER 23 Performance Evaluation Using 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

Alternative Computation of Overhead Variances

Factory Overhead

23-55