CHAPTER 25
SOLUTIONS TO EXERCISES—SET B
EXERCISE 25-1B
(a) Direct materials: (2,000 X 2.5) X $5 = $25,000
Overhead: $18,000 X 70% = $12,600
(b) Direct materials: 2.5 X $5 = $12.50
Direct labor: 1/2 X $18 = 9.00
(c) The advantages of standard costs which are carefully established and
prudently used are:
1. Management planning is facilitated.
EXERCISE 25–2B
Ingredient
Amount
Per
Gallon
Standard
Waste
Standard
Usage
Standard
Cost Per
Gallon
Grape concentrate
Sugar (54 ÷ 50)
66* oz.
1.08 lb.
4%
10%
(a)
(b)
68.75 oz.
1.2 lb.
$5.50
.36
EXERCISE 25-3B
Direct materials
Cost per pound [$3 – (1% X $3) + $0.25] $3.22
Pounds per unit (4.5 + 0.5) X 5 $16.10
Direct labor
EXERCISE 25-4B
(a)
Actual service time
Setup and downtime
0.90 hours
0.09 hours
(b)
Hourly wage rate
Payroll taxes ($12 X 12%)
$12.00
1.44
EXERCISE 25-5B
(a) Total materials variance:
(27,000 X $3.80)
$102,600
–
$104,000
=
$1,400 F
( AQ X SP )
( AQ X AP )
–
( SQ X SP )
Materials quantity variance:
( AQ X SP )
(27,000 X $4.00)
$108,000
–
–
( SQ X SP )
(26,000 X $4.00)
$104,000
=
$4,000 U
(b) Total materials variance:
( AQ X AP )
(25,200 X $4.20)
$105,840
–
–
( SQ X SP )
(26,000 X $4.00)
$104,000
=
$1,840 U
( AQ X AP )
–
–
( AQ X SP )
$100,800
=
( AQ X SP )
(25,200 X $4.00)
–
( SQ X SP )
(26,000 X $4.00)
EXERCISE 25-6B
(a) Total labor variance:
( AH X AR )
(30,500 X $10.10)
–
( SH X SR )
(30,000* X $10.00)
(b) Labor price variance:
( AH X AR )
(30,500 X $10.10)
$308,050
–
–
( AH X SR )
(30,500 X $10.00)
$305,000
=
$3,050 U
Labor quantity variance:
–
( SH X SR )
( AH X AR )
–
( AH X SR )
(30,500 X $10.20)
–
( SH X SR )
EXERCISE 25-7B
Total materials variance:
( AQ X AP )
(1,600 X $2.62*)
$4,192
–
–
( SQ X SP )
(1,500** X $2.50)
$3,750
=
$442 U
EXERCISE 25-7B (Continued)
Materials quantity variance:
( AQ X SP )
(1,600 X $2.50)
$4,000
–
–
( SQ X SP )
(1,500 X $2.50)
$3,750
=
$250 U
Total labor variance:
–
(775** X $12.00)
$9,300
=
$560 F
$9,300
=
$180 F
( AH X AR )
–
( SH X SR )
EXERCISE 25-7B (Continued)
(Not Required)
Materials Variance Matrix
(1)
(2)
(3)
Actual Quantity
X Actual Price
Actual Quantity
X Standard Price
Standard Quantity
X Standard Price
1,600 X $2.62 = $4,192
1,600 X $2.50 = $4,000
1,500 X $2.50 = $3,750
Total Variance
Price Variance
Quantity Variance
Labor Variance Matrix
(1)
(2)
(3)
Actual Hours
X Actual Rate
Actual Hours
X Standard Rate
Standard Hours
X Standard Rate
EXERCISE 25-8B
(a) Total materials variance:
( AQ X AP )
(910 X $89)
$80,990
–
–
( SQ X SP )
(900 X $90)
$81,000
=
$10 F
( AQ X AP )
–
( AQ X SP )
–
( SQ X SP )
Total labor variance:
( AH X AR )
(3,200 X $13)
$41,600
–
–
( SH X SR )
(3,240 X $12)
$38,880
=
$2,720 U
( AH X SR )
–
EXERCISE 25-8B (Continued)
The unfavorable labor price variance may be caused by misallocation
of the work force by the production department. In this case, more
EXERCISE 25-9B
(a) Number of units = Total standard cost ÷ Standard cost per unit
Number of units = $396,000 ÷ $18.00 (6 lb X $3 per lb) = 22,000
(b) AQ = [(SQ X SP)
±
Quantity variance] ÷ SP
AQ = ($396,000 – $9,000) ÷ $3.00 per lb = 129,000 pounds
±
±
EXERCISE 25-10B
MICKY TOOL & DIE COMPANY
Direct Labor Variance Report
For the Month Ended March 31, 2017
Job
No.
Actual
Hours
Standard
Hours
Quantity
Variance
(a)
Actual
Rate
(1)
Standard
Rate
(2)
Price
Variance
(b)
Explanation
B257
220
225
$125.00
F
$25.00
$25.00
$ 0
Repeat job
EXERCISE 25-11B
Total overhead variance:
Actual Overhead
$140,000
–
–
Overhead Applied
$136,000
(34,000 X $4)
=
$4,000 U
EXERCISE 25-12B
(a)
Overhead Budget
(at normal capacity)
÷
Direct Labor Hours
(at normal capacity)
=
Predetermined
Overhead Rate
Variable
$200,000
100,000
$2
Fixed
800,000
100,000
$8
(b)
X
=
(c)
$986,000
EXERCISE 25-13B
(a)
(AQ X AP)
( $13,000)
–
–
( SQ X SP)
(3,080* X $4)
=
=
Total Materials Variance
$680 U
(AQ X AP)
( $13,000)
–
–
( AQ X SP)
(3,300 X $4)
=
=
Materials Price Variance
$200 F
–
–
( SQ X SP)
=
=
EXERCISE 25-14B
(a)
PLEASANT LANDSCAPING
Variance Report – Purchasing Department
For the Current Month
Project
Actual
Pounds
Purchased
(1)
Actual
Price
(2)
Standard
Price
Price
Variance
(a)
Explanation
Bear
Kanyon
500
400
$2.80
2.90
$3.00
3.00
$100 F
40 F
Purchased poor quality seeds
Seeds on sale
(b)
PLEASANT LANDSCAPING
Variance Report – Production Department
For the Current Month
Project
Actual
Pounds
Standard
Pounds
Standard
Price
Quantity
Variance
(b)
Explanation
Bear
500
460
$3.00
$120 U
Purchased poor quality seeds
EXERCISE 25-15B
NEWMAR CORPORATION
Variance Report – Purchasing Department
For Week Ended January 9, 2017
Type of
Materials
Quantity
Purchased
Actual
Price
Standard
Price
Price
Variance
Explanation
Soda10
Red14
15,000 lbs.
5,000 oz.
$5.20
$4.41
$5.00
$4.20
$3,000 U
$1,050 U
Price increase
Rush order
EXERCISE 25-16B
POTTER COMPANY
Income Statement
For the Month Ended January 31, 2017
Sales (6,000 X $8) ………………………………………………….. $48,000
Cost of goods sold (6,000 X $6) ……………………………… 36,000
Gross profit (at standard) ………………………………………. 12,000
Variances
Materials price ……………………………………………….. $2,250
Materials quantity …………………………………………… (700)
Labor price…………………………………………………….. 525
*EXERCISE 25-17B
1. Raw Materials Inventory (25,000 X $4.30) ……………. 107,500
Materials Price Variance (25,000 X $.20) ……………… 5,000
Accounts Payable (25,000 X $4.50) ………………. 112,500
2. Work in Process Inventory (23,500 X $4.30) ………… 101,050
*EXERCISE 25-18B
(a) $151,000 ($148,000 + $3,000).
(b) $148,000 ($151,000 – $3,000).
*EXERCISE 25-19B
Raw Materials Inventory (1,600 X $2.50) ………………………. 4,000
*EXERCISE 25-19B (Continued)
Work in Process Inventory (1,500* X $2.50) …………………. 3,750
Materials Quantity Variance (100 X $2.50) ……………………. 250
Raw Materials Inventory (1,600 X $2.50) ……………….. 4,000
*250 X 6
Factory Labor (760 X $12) ………………………………………….. 9,120
*EXERCISE 25-20B
(a)
Item
Amount
Hours
Rate
$55,000
Variable overhead ……………………………..
$33,000
11,000
$3
(b) Total overhead variance:
Actual Overhead
–
Overhead Applied
*EXERCISE 25-20B (Continued)
(c) The overhead controllable variance is generally associated with variable
overhead costs. Thus, this variance indicates the production manager’s
inefficiency in controlling variable overhead costs.
*EXERCISE 25-21B
(a)
(1)
Total actual overhead cost
=
Overhead
Budgeted +
Overhead
Controllable
Variance
=
=
(2)
Actual variable overhead cost
=
Actual Overhead – Fixed Overhead
=
$29,000 – $12,000
=
(3)
Variable overhead cost applied
=
2,000 hours X $8 = $16,000
(4)
Fixed overhead cost applied
=
2,000 hours X $5 = $10,000
=
(b)
Number of loans processed
=
Standard hours allowed ÷
Standard hours per application
=
1,000 loans processed
*EXERCISE 25-22B
(a)
(Actual)
($21,000)
–
–
(Applied)
(1,800 X $11*)
=
=
Total Overhead Variance
$1,200 U
(b) The cause of an unfavorable controllable variance could be higher than
expected use of indirect materials, indirect labor, and factory supplies, or