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EXERCISE 25-15
URBAN CORPORATION
Variance Report – Purchasing Department
For Week Ended January 9, 2017
Type of
Materials
Quantity
Purchased
Actual
Price
Standard
Price
Price
Variance
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
$5,500 U
$1,050 U
$ 660 F
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
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
*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
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
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
(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
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
(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
