EXERCISE 25–15
URBAN CORPORATION
Variance Report – Purchasing Department
For Week Ended January 9, 2017
Type of
Materials
Quantity
Purchased
Actual
Price
Standard
Price
Explanation
Rogue 11
Storm 17
Beast 29
27,500 lbs.
7,000 oz.
22,000 units.
$5.20
$3.45
$0.40
$5.00
$3.30
$0.43
Price increase
Rush order
Bought larger quantity
EXERCISE 25–16
FISK COMPANY
Income Statement
For the Month Ended January 31, 2017
Sales revenue (8,000 X $8) ……………………………………… $64,000
Cost of goods sold (8,000 X $5) ……………………………… 40,000
Gross profit (at standard) ………………………………………. 24,000
Variances
EXERCISE 25–17
1. Balanced scorecard—(c) An approach that incorporates financial and
nonfinancial measures in an integrated system that links performance
measurement and a company’s strategic goals.
2. Variance—(a) The difference between total actual costs and total stan-
EXERCISE 25–18
1. Customer perspective.
EXERCISE 25–19
1.
Learning and growth perspective.
*EXERCISE 25–20
1. Raw Materials Inventory (18,000 X $4.40) ……………. 79,200
Materials Price Variance (18,000 X $.10) ……………… 1,800
Accounts Payable (18,000 X $4.50) ………………. 81,000
*EXERCISE 25-21
(a) $136,000 ($138,000 – $2,000).
*EXERCISE 25-22
Raw Materials Inventory (1,900 X $2.50) ……………………… 4,750
Materials Price Variance (1,900 X $0.15) ……………………… 285
Accounts Payable (1,900 X $2.65) ………………………… 5,035
*230 X 3
*EXERCISE 25-23
(a)
Item
Amount
Hours
Rate
$54,450
Variable overhead ……………………………..
$34,650
16,500
$2.10
EXERCISE 25-23 (Continued)
Overhead volume variance:
Fixed Overhead
Rate
X
Normal Capacity
Hours
–
Standard Hours
Allowed
*EXERCISE 25-24
(a)
1.
Total actual overhead cost
=
Overhead
Budgeted +
Overhead
Controllable
Variance
=
($18,000 + $12,600) + $1,200
=
$31,800
=
=
=
=
=
2,000 hours X $6 = $12,000
=
=
*EXERCISE 25-25
(a)
(Actual)
($19,500)
–
–
(Applied)
(1,800 X $10*)
=
=
Total Overhead Variance
$1,500 U
(Actual)
($19,500)
–
–
(Budgeted)
($17,600)
=
=
Overhead Controllable Variance
$1,900 U
SOLUTIONS TO PROBLEMS
PROBLEM 25–1A
(a) Total materials variance:
( AQ X AP )
(5,100 X $7.20)
$36,720
–
–
( SQ X SP )
(4,800 X $7.00)
$33,600
=
$3,120 U
Materials price variance:
( AQ X AP )
(5,100 X $7.20)
$36,720
–
–
( AQ X SP )
(5,100 X $7.00)
$35,700
=
$1,020 U
( AQ X SP )
–
Labor price variance:
( AH X AR )
(7,400 X $12.50)
$92,500
–
–
( AH X SR )
(7,400 X $12.00)
$88,800
=
$3,700 U
Labor quantity variance:
–
PROBLEM 25–2A
(a) 1. Total materials variance:
( AQ X AP )
(10,600 X $2.25)
$23,850
–
–
( SQ X SP )
(10,000 X $2.10)
$21,000
=
$2,850 U
( AQ X AP )
( AQ X SP )
( AQ X SP )
–
( SQ X SP )
2. Total labor variance:
( AH X AR )
(14,400 X $8.40*)
$120,960
–
–
( SH X SR )
(15,000 X $8.00**)
$120,000
=
$960 U
*$120,960 ÷ 14,400 **$120,000 ÷ 15,000
( AH X AR )
$120,960
–
–
( AH X SR )
=
$5,760 U
–
(b) Total overhead variance:
Actual
Overhead
–
Overhead
Applied
PROBLEM 25-2A (Continued)
(c) AYALA CORPORATION
Income Statement
For the Month Ended June 30, 2017
Sales revenue …………………………………………….. $400,000
Cost of goods sold (at standard) …………………. 334,500*
Gross profit (at standard) ……………………………. 65,500
Variances
PROBLEM 25–3A
(a) 1. Total materials variance:
( AQ X AP )
(90,500 X $4.15)
$375,575
–
–
( SQ X SP )
(90,000* X $4.40)
$396,000
=
$20,425 F
*11,250 X 8
Materials price variance:
( AQ X AP )
(90,500 X $4.15)
$375,575
–
–
( AQ X SP )
(90,500 X $4.40)
$398,200
=
$22,625 F
( AQ X SP )
–
–
( AH X SR )
=
PROBLEM 25-3A (Continued)
(c) The materials price variance is more than 4% from standard. The actual
price for materials of $4.15 is $.25 below the standard price of $4.40 or
5.7% ($.25 ÷ $4.40). The same result can be obtained by dividing the
total price variance by the total standard price for the quantities purchased
($22,625 ÷ $398,200).
PROBLEM 25–4A
(a) $3,510 ÷ 117,000 = $.03; $.92 + $.03 = $.95 standard materials price per
pound. OR
117,000 X $.92 = $107,640; $107,640 + $3,510 = $111,150; $111,150 ÷
117,000 = $.95 per pound.
(b) $4,750 ÷ $.95 = 5,000 pounds; 117,000 – 5,000 = 112,000 standard
quantity for 28,000 units or 4.0 pounds (112,000 ÷ 28,000) per unit. OR
$111,150 – $4,750 = $106,400; $106,400 ÷ $.95 = 112,000; 112,000 ÷
28,000 = 4.0 pounds per unit.
PROBLEM 25–5A
(a) Materials price variance:
( AQ X AP )
(3,050 X $1.40*)
$4,270
–
–
( AQ X SP )
(3,050 X $1.46)
$4,453
=
$183 F
=
$146 U
(b) Total Overhead variance:
Actual
Overhead
PROBLEM 25-5A (Continued)
(c)
HART LABS, INC.
Income Statement
For the Month Ended November 30, 2017
Service revenue ……………………………………………… $75,000
Cost of service provided (at standard)
(1,500 X $42.92) …………………………………………… 64,380
(d) The unfavorable materials quantity variance could be caused by poor
quality materials or inexperienced workers or faulty test procedures.
*PROBLEM 25–6A
(a) 1. Raw Materials Inventory (6,200 X $1.00) ………… 6,200
3. Factory Labor (2,000 X $8) ……………………………. 16,000
Labor Price Variance
[2,000 X ($8.00 – $7.80)] ……………………… 400
Factory Wages Payable (2,000 X $7.80) ….. 15,600
4. Work in Process Inventory
(1,900 X $8.00) …………………………………………. 15,200
Labor Quantity Variance
[(2,000 – 1,900) X $8.00] ……………………………. 800
Factory Labor …………………………..………….. 16,000
*PROBLEM 25-6A (Continued)
(b)
Raw Materials Inventory
Materials Price Variance
Work in Process Inventory
(1) 6,200
(2) 6,200
(1) 310
(2) 5,700
(4) 15,200
(6) 23,750
(7) 44,650
(c) Overhead Variance ($25,000 – $23,750) …………… 1,250
Manufacturing Overhead …………………………. 1,250
(d) JORGENSEN CORPORATION
Income Statement
For the Month Ended January 31, 2017
Sales revenue ……………………………………………….. $65,000
Cost of goods sold (at standard)
(1,900 X $23.50) ………………………………………….. 44,650
Gross profit (at standard) ……………………………….. 20,350
Variances