CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–4A (FIN MAN); Prob. 9–4A (MAN) (Concluded)
Alternative Computation of Overhead Variances
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–5A (FIN MAN); Prob. 9–5A (MAN)
1.
Actual hours provided (5 × 40 hrs.) ……………………………………………………..
200
Standard hours required for the original plan* ……………………………………..
(186)
Labor time difference …………………………………………………………………………
14
× Standard labor rate ………………………………………………………………………….
2.
Actual hours provided (5 × 40 hrs.) ……………………………………………………..
200
Standard hours required for the actual results* ……………………………………
(226)
Labor time difference …………………………………………………………………………
(26)
× Standard labor rate ………………………………………………………………………….
× $32
Direct labor time variance—favorable ………………………………………………….
3.
Actual labor rate ………………………………………………………………………………..
$ 40
Standard labor rate …………………………………………………………………………….
(32)
Difference ………………………………………………………………………………………….
$ 8
× Actual hours provided (5 × 40 hrs.) …………………………………………………..
× 200
Direct labor rate variance—unfavorable ………………………………………………
4.
Actual hours provided (6 × 40 hrs.) ……………………………………………………..
240
Standard hours required for the actual results* ……………………………………
(226)
Labor time difference …………………………………………………………………………
14
× Standard labor rate ………………………………………………………………………….
× $32
Direct labor time variance—unfavorable ………………………………………………
$ 448
* From part (2) above
5. 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
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–1B (FIN MAN); Prob. 9–1B (MAN)
a.
Standard
Materials and
Labor Cost
per Unit
Direct materials ($5.00 × 5.0 yds.) …………………………………………………………..
$25.00
b.
Direct Materials Cost Variance
=
(Actual Price – Standard Price) × Actual Quantity
=
($5.10 per yd. – $5.00 per yd.) × 26,200 yds.
=
(Actual Quantity – Standard Quantity) × Standard Price
=
(26,200 yds. – 26,100 yds.*) × $5.00 per yd.
Direct Materials Quantity Variance
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–1B (FIN MAN); Prob. 9–1B (MAN) (Concluded)
c.
Direct Labor Cost Variance
Rate variance:
Direct Labor
=
(Actual Rate per Hour – Standard Rate per Hour)
Rate Variance
× Actual Hours
Time variance:
Direct Labor
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
Time Variance
× Standard Rate per Hour
=
(1,000 hrs. – 1,044 hrs.*) × $12.00 per hour
=
$(528) Favorable
*
(12 min. ÷ 60 min.) × 5,220
Total direct labor cost variance:
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–2B (FIN MAN); Prob. 9–2B (MAN)
1. a.
Direct Materials Variance
Filler
Liner
Total
Price variance:
Actual price ………………………………………….
$ 1.90
$ 8.20
Quantity variance:
Total direct materials cost variance ……………
$10,940
U
Alternatively, total direct materials cost variance:
Actual cost 2 …………………………………………
$ 91,200
$ 697,820
Standard cost 3 …………………………………….
(95,520)
(682,560)
Total direct materials cost variance ..
$ (4,320)
F
$ 15,260
U
$10,940
U
1
47,760 = (4.0 lbs. × 4,400 actual production of women’s coats) + (5.20 lbs. × 5,800 actual production of
of men’s coats)
2
$91,200 = $1.90 × 48,000 lbs.
3
$95,520 = $2.00 × 47,760 lbs.
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–2B (FIN MAN); Prob. 9–2B (MAN) (Concluded)
1. b.
Direct Labor Variance
Women’s
Coats
Men’s
Coats
Total
Rate variance:
Actual rate ……………………………………………
$ 14.10
$ 13.30
Time variance:
Actual time …………………………………………..
1,825
2,800
Standard time 1 …………………………………….
(1,760)
(2,900)
Total direct labor cost variance …………………
$ 632.50
U
Alternatively, total direct labor cost variance:
Actual cost 2 …………………………………………
$ 25,732.50
$ 37,240.00
Standard cost 3 …………………………………….
(24,640.00)
(37,700.00)
Total direct labor cost variance ……….
$ 1,092.50
U
$ (460.00)
F
$ 632.50
U
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
3
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
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–3B (FIN MAN); Prob. 9–3B (MAN)
a.
Direct Materials Cost Variance
Price variance:
Quantity variance:
Direct Materials
=
(Actual Quantity – Standard Quantity) × Standard Price
Quantity Variance
=
(101,000 lbs. – 100,000 lbs.) × $6.40 per lb.
=
$6,400 Unfavorable
Total direct materials cost variance:
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–3B (FIN MAN); Prob. 9–3B (MAN) (Continued)
b.
Direct Labor Cost Variance
Rate variance:
Direct Labor
=
(Actual Rate per Hour – Standard Rate per Hour)
$(700) Favorable
Time variance:
Direct Labor
=
(Actual Direct Labor Hours – Standard Direct Labor Hours)
Time Variance
× Standard Rate per Hour
=
(2,000 hrs. – 2,080 hrs.) × $15.75 per hour
=
$(1,260) Favorable
Total direct labor cost variance:
Direct Labor
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–3B (FIN MAN); Prob. 9–3B (MAN) (Continued)
c.
Factory Overhead Cost Variance
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred ………………
$ 8,200
Budgeted variable factory overhead for 2,080 hrs.* …………
(8,320)
**
Variance—favorable ………………………………………………….
$(120)
Fixed factory overhead volume variance:
Normal capacity at 100% ………………………………………………..
Productive capacity overemployed ………………………………..
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–3B (FIN MAN); Prob. 9–3B (MAN) (Concluded)
Alternative Computation of Overhead Variances
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–4B (FIN MAN); Prob. 9–4B (MAN)
Feeling Better Medical Inc.
Factory Overhead Cost Variance Report—Assembly Department
For the Month Ended October 31
Normal capacity for the month
30,000 hrs.
Actual production for the month
28,500 hrs.
Actual
Indirect factory wages
$234,000
$235,125
Indirect materials
Budget
(at Actual
Variances
Unfavorable
(Favorable)
Fixed factory overhead costs:
Supervisory salaries
$126,000
$126,000
Depreciation of plant and
equipment
70,000
70,000
Insurance and property taxes
44,000
44,000
Total fixed cost
$240,000
$240,000
Total factory overhead cost
$703,100
$704,550
Total controllable variances
Idle hours at the standard rate for
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,
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–4B (FIN MAN); Prob. 9–4B (MAN) (Concluded)
Alternative Computation of Overhead Variances
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
Prob. 23–5B (FIN MAN); Prob. 9–5B (MAN)
1.
Actual hours provided (3 × 40 hrs.) ………………………………………………………
120
Standard hours required for the original plan* ………………………………………
(117)
Labor time difference ………………………………………………………………………….
× Standard labor rate …………………………………………………………………………..
Direct labor time variance—unfavorable ………………………………………………
81,900 lines
* = 117 hrs
2.
Actual hours provided (3 × 40 hrs.) ………………………………………………………
120
Standard hours required for the actual results* …………………………..………..
(127)
Labor time difference ………………………………………………………………………….
(7)
× Standard labor rate …………………………………………………………………………..
× $23
Direct labor time variance—favorable …………………………………………………..
$(161)
88,900 lines
* = 127 hrs
700 lines per hr.
3.
Actual labor rate …………………………………………………………………………………
$ 30
Standard labor rate ……………………………………………………………………………..
(23)
Difference …………………………………………………………………………………………..
× Actual hours provided (3 × 40 hrs.) …………………………..……………………….
$840 unfavorable rate variance].
4.
Actual hours provided (4 × 40 hrs.) ………………………………………………………
160
Standard hours required for the actual results …………………………..…………
(127)
Labor time difference ………………………………………………………………………….
33
× Standard labor rate …………………………………………………………………………..
× $23
Direct labor time variance—unfavorable ………………………………………………
$ 759
5. The bonus is the better approach by $80. The direct labor cost variance for
paying the bonus was $679 unfavorable which is the sum of the time variance
CHAPTER 23 (FIN MAN); CHAPTER 9 (MAN) Evaluating Variances from Standard Costs
COMPREHENSIVE PROBLEM 5
Part A
1.
Difference in Total Cost
Variable Cost per Unit = Difference in Production
$740 – $600
Variable Cost per Unit = = $0.20 per case
1,200 cases – 500 cases
Total Cost = (Variable Cost per Unit × Units of Production) + Fixed Cost
2.
Selling price ……………………………………………………………………
$100.00
Variable costs per case:
Direct materials ………………………………………………………….
3.
Total fixed costs:
Utilities [see part (1)] ………………………………………………….
$ 500
Facility lease ……………………………………………………….…….
14,000
Equipment depreciation ……………………………………………..
4,300
Supplies ………………………………………………………………………………
660
$19,460