Exercise 23-13 (30 minutes)
1. Preliminary computations
Actual quantity: 22,000 bd. ft. (given)
Direct material cost variances
Actual units at actual cost [22,000 bd. ft. @ $12.10] …………………………..
$266,200
Price and quantity variances
Actual Cost
AQ x AP
AQ x SP
Standard Cost
SQ x SP
(Total materials variance)
Alternate solution format
Price variance
= AQ x (AP – SP)
= 22,000 board feet x ($12.10 – $12.00)
= $2,200 U
Quantity variance
= (AQ – SQ) x SP
= $24,000 F
Price variance …………………
Quantity variance ……………
Total variance …………………
2. The unfavorable price variance means the actual price paid is more than
the budgeted price. The favorable quantity variance means the actual
1374
Exercise 23-14A (25 minutes)
1.
Work in Process Inventory ………………………………………………
288,000
2.
Direct Materials Quantity Variance …………………………..
24,000
3. The $24,000 materials quantity variance should be investigated because of
Direct Materials Price Variance* ………………………………………
1375
Exercise 23-15 (25 minutes)
Part 1
Direct materials price variance:
Actual cost of direct materials used (16,000 x $4.05) ………………………….
$ 64,800
Part 2
Direct labor rate variance:
Actual hours x Actual rate per hour (5,545 x $19.00***) ………………………
$105,355
Actual hours x Standard rate per hour (5,545 x $20.00) ………………………
110,900
Direct labor rate variance ……………………………………………………….
$ 5,545
F
Actual hours x Standard rate per hour (5,545 x $20.00) ………………………
$110,900
Standard hours x Standard rate per hour (5,000** x $20.00) ………………..
100,000
Direct labor efficiency variance ……………………………………………………….
$ 10,900
U
Actual quantity used x Standard price (16,000 x $4.00) ………………………
Direct materials price variance ……………………………………………………….
$ 800
U
Actual quantity used x Standard price (16,000 x $4.00) ………………………
Standard quantity x Standard price (15,000* x $4.00) ………………………….
Direct materials quantity variance ……………………………………………………..
$ 4,000
U
1376
Exercise 23-16 (30 minutes)
1.
October variances
Preliminary computations
Actual hours: 16,250 hours (given)
Standard hours: 5,600 units x 3 hrs./unit = 16,800 hrs.
Rate and efficiency variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
Alternate solution format
Rate variance
= AH x (AR – SR)
= 16,250 hours x ($15.20 – $15.00) per hour
= 16,250 hours x $0.20 per hour
= $3,250 U
Efficiency variance
= (AH – SH) x SR
= (-550 hours) x $15.00 per hour
= $8,250 F
Rate variance ………………….
Efficiency variance ………….
Total …………………………..
1377
Exercise 23-16 (Concluded)
November variances
Preliminary computations
Actual hours: 22,000 hours (given)
Standard hours: 6,000 units x 3 hrs./unit = 18,000 hours
Rate and efficiency variances
Actual Cost
AH x AR
AH x SR
Standard Cost
SH x SR
22,000 x $15.25
22,000 x $15.00
18,000 x $15.00
hours per hour
hours per hour
hours per hour
2.
The unfavorable labor rate variance in October means the actual rate for an
hour of labor is greater than budgeted. The favorable labor efficiency
Exercise 23-17 (20 minutes)
1. Predetermined overhead rate computations
Expected volume …………………………………………………………….
75%
Expected total overhead ………………………………………………….
$2,100,000
Expected hours ………………………………………………………………
Variable cost per hour ($1,500,000/ 375,000) …………………….
Fixed cost per hour ($600,000/ 375,000) …………………………..
Total cost per hour ($2,100,000/ 375,000) …………………………
2. Variable overhead cost variance
Variable overhead cost incurred [given] …………………………..
$1,375,000
Variable overhead cost applied [350,000 hrs. @ $4.00] ………………………
1,400,000
Fixed overhead cost incurred [given] ……………………………………….
Fixed overhead cost applied [350,000 hrs. @ $1.60] ………………….
Fixed overhead cost variance ………………………………………………….
1379
Exercise 23-18A (20 minutes)
1.
Variable overhead spending and efficiency variances
Actual Overhead
AH x AVR
AH x SVR
Applied Overhead
SH x SVR
(Given)
340,000 x $4.00
350,000 x $4.00
Interpretation:
The $15,000 unfavorable spending variance means the actual cost of variable
overhead is more than budgeted. This unfavorable variance can occur
hours per hour
hours per hour
1380
Exercise 23-18A (continued)
2.
Fixed overhead spending and volume variances
Actual Overhead
Budgeted Overhead
Applied Overhead
(Given)
(Given)
350,000 x $1.60
hours per hour
Interpretation
The $28,600 unfavorable spending variance means actual cost of fixed
overhead is more than budgeted.
3. The controllable variance is computed as:
Variable overhead spending variance ……………………………..
$15,000 U
Variable overhead efficiency variance ……………………………..
40,000 F
Fixed overhead spending variance ………………………………….
28,600 U
1381
Exercise 23-19 (20 minutes)
Information given
Planned units to be produced = 80% x 50,000 capacity = 40,000 units
1. Total overhead planned at 80% level (25,000 direct labor hours)
Budgeted
Cost
Ovhd.
Rate*
Fixed overhead…………………………...
$ 50,000
$ 2.00
Variable overhead ……………………….
Total overhead …………………………...
2. Total overhead variance
Total actual overhead (given) ……………………………………………………….
$305,000
Total overhead variance ……………………………………………………….
1382
Exercise 23-20 (30 minutes)
1. The overhead volume variance is computed as:
2. Overhead controllable variance*
Total actual overhead (given)
$305,000
Budgeted overhead
Overhead controllable variance ……………………………………………………….
1383
EX
Exercise 23-21 (25 minutes)
Preliminary calculations:
Variable overhead rate per DL hour = $48,000/24,000 = $2 per hour
Part 1
Total actual overhead (given) …………………………
$99,250
Budgeted overhead
Overhead controllable variance……………………….
Part 2
Total fixed overhead applied ($1.85 x 27,000) ………
Overhead controllable variance……………………….
Total budgeted fixed overhead (given) ………………
$44,400
1384
Exercise 23-21 (continued)
Part 3
JAMES CORP.
Overhead Variance Report
For Month Ended May 31
Volume Variance
Expected production level …………………………………………….
80% of capacity
Production level achieved …………………………………………….
90% of capacity
Volume variance …………………………..…………………………..
$5,550 (favorable)
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
Indirect materials …………………………..
$16,875
$15,000
$1,875
F
Indirect labor ……………………………………..
F
U
F
U
U
1385
Exercise 23-22 (25 minutes)
Preliminary calculations:
Variable overhead rate per DL hour = $32,000/32,000 = $1 per hour
Part 1
Total actual overhead (given) …………………………
$81,700
Budgeted overhead
Overhead controllable variance ………………………
Part 2
Total fixed overhead applied ($1.50 x 36,000) ………
Overhead controllable variance ………………………
1386
Exercise 23-22 (continued)
Part 3
BLAZE CORP.
Overhead Variance Report
For Month Ended March 31
Volume Variance
Expected production level ……………………………………
80% of capacity
Flexible
Actual
Controllable Variance
Budget
Results
Variances*
Variable overhead costs
Indirect materials ………………………
$11,250
$10,000
$1,250
F
Indirect labor …………………………..
18,000
16,000
F
Maintenance …………………………..
U
Total variable costs …………………..
36,000
33,500
F
Fixed overhead costs
Rent of factory building …………….
12,000
12,000
0
20,000
19,200
F
Taxes and insurance …………………
U
Supervisory salaries ………………….
U
Total fixed costs………………………..
U
Production level achieved ……………………………………
90% of capacity
Volume variance …………………………..……………………..
1387
Exercise 23-23 (25 minutes)
1. Sales price and sales volume variances
Sales Actual Sales
Flexible Budget
Fixed Budget
Units 350
350
365
2. Interpretation
The $35,000 favorable sales price variance implies it sold computers for a
1388
PROBLEM SET A
Problem 23-1A (60 minutes)
Part 1
Variable or Fixed Classification
Amount*
Variable sales (total divided by 15,000 units)
Sales ……………………………………………………….…………………………….
$ 200.00
Variable costs (total divided by 15,000 units)
Direct materials ……………………………………………………………………..
$ 65.00
Direct labor ……………………………………………………………………………
15.00
Fixed costs
Depreciation—Plant equipment ………………………………………………
$ 300,000
Utilities ($195,000 – $45,000 variable) ………………………………………
150,000
Plant management salaries …………………………..………………………..
200,000
Sales salary …………………………………………………………………………..
250,000
Salaries …………………………………………………………………………………
241,000
Entertainment expense …………………………………………………………..
*Amounts are variable costs per unit or fixed costs for the year.
Machinery repairs ………………………………………………………………….
Utilities ($45,000 variable) ………………………………………………………
Packaging ……………………………………………………………………………..
Shipping ………………………………………………………………………………..
Total variable costs ………………………………………………………………..
$ 99.00
1389
Problem 23-1A (Continued)
Part 2
PHOENIX 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 14,000
Budget for
Unit Sales
of 16,000
Sales ……………………………….
$200.00
$2,800,000
$3,200,000
Variable costs
Direct materials ……………..
65.00
910,000
1,040,000
Fixed costs
Depreciation—Plant Equip ….
$ 300,000
300,000
300,000
Utilities ………………………….
150,000
150,000
150,000
200,000
200,000
250,000
250,000
250,000
Salaries …………………………
241,000
241,000
Total fixed costs…………….
210,000
240,000
Machinery repairs ………….
Utilities ………………………….
Packaging ……………………..
1,616,000
1390
Problem 23-1A (Continued)
Part 3
Operating income increase for a 15,000 to 18,000 unit sales increase
Possible sales (units) ………………………………………………………
18,000
Contribution margin per unit ……………………………………………
x $101
*Alternate solution format
Unit increase ……………………………………………………………………………….
3,000
Units
income is the same $303,000.
Part 4
Operating income (loss) at 12,000 units
Possible sales (units) ………………………………………………………
12,000
Total contribution margin ………………………………………………..
Total contribution margin ………………………………………………..
1391
Problem 23-2A (45 minutes)
Part 1
PHOENIX COMPANY
Flexible Budget Performance Report
For Year Ended December 31, 2017
Flexible
Actual
Budget
Results
Variances*
Sales (18,000 units) ……………………..
$3,600,000
$3,648,000
$48,000
F
Variable costs
Fixed costs
Depreciation—Plant equip. ………..
300,000
300,000
0
Utilities ……………………………………..
150,000
147,500
2,500
F
200,000
210,000
U
U
125,000
132,000
U
241,000
241,000
0
U
U
U
270,000
278,000
U
F
Utilities ……………………………………..
F
F
F
U
F
1392
Problem 23-2A (Continued)
Part 2
(a) Analysis of sales variance
(b)
Total
Per unit
Budgeted sales ……………………………………………………..
$3,600,000
$200.00
(c) Analysis of direct materials variance
Total
Per unit
Budgeted materials………………………………………………..
$1,170,000
$ 65.00
Actual materials used …………………………………………….
Direct materials variance ……………………………………….
$ 0.83
U
Sales variance ……………………………………………………….
F