Course Hero has millions of student submitted documents similar to the one

below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

16 Chapter - Fundamentals of Variance Analysis
16
Fundamentals of Variance Analysis
Solutions to Review Questions
16-1.
For performance evaluation purposes, the costing format should identify the actual costs
for comparison with expected costs during the relevant period. Under absorption costing,
the manufacturing fixed costs are allocated on a per unit basis. An increase in production
results in a lower per unit cost. If all of the production is sold, all of the fixed cost will be
charged against profit. However, if some of the costs are assigned to inventory, the result
can be a deferral of costs that should be evaluated at this time. This problem is highlighted
by the suggestion that one can increase production in times of declining sales in order to
help the bottom line by spreading fixed costs over more units. Because variable costing
excludes fixed overhead for inventory valuation (fixed overhead is treated as a period
expense), there is no motivation to produce goods for inventory.
16-2.
False. Only variable costs and revenues flex with changes in activity. Fixed costs are
expected to remain the same when operations are in the relevant range.
16-3.
(d)
Appropriate for any level of activity.
16-4.
(b) The master budget is based on a predicted level of activity and a flexible budget is
based on the actual level of activity.
16-5.
False. A standard is related to a cost per unit. Budgets focus on totals.
16- 1
Chapter 16 - Fundamentals of Variance Analysis
16-6.
The three primary sources of variances are:
a. price variances, which arise because actual material prices differ from standards;
b. efficiency variances which occur when the relationship between the usage of input
factors (labor, materials, variable overhead) differs from that which would be expected
to produce a given level of output; and
c. activity variances, which represent differences between, planned (master budget)
output levels and the output levels actually attained during the period.
16-7.
The fixed cost variances differ from variable cost variances because fixed costs do not
vary with the level of production activity. Therefore, the fixed costs in the flexible budget
will be the same as in the master budget (within the relevant range). Additionally, there are
no efficiency variances for fixed costs because there is no input-output relationship that
can be applied.
16- 2
Chapter 16 - Fundamentals of Variance Analysis
Solutions to Critical Analysis and Discussion Questions
16-8.
Preparation of the ex-post budget allows management to compare actual results with the
budget that would have been instituted if certain ex-ante factors were known. The most
significant of these is, typically, volume of activity. By controlling for the difference between
ex-ante expectations and the ex-post volumes, comparisons between actual results and
plans can be more meaningful. The controllable factors (e.g., costs per unit, efficiency,
sales prices) can be isolated and evaluated.
16-9.
A flexible budget indicates budgeted revenues, costs and profits for virtually all feasible
levels of activity. Managers can use the flexible budget to determine what costs should be
assuming different levels of activity. Because changes in volume of production might not
be within the particular managers control, the flexible budget allows supervisory
managers to isolate the effect of changes in volume on the overall costs of a department
in question. The flexible budget also separates fixed and variable costs. Generally, fixed
costs are less controllable in the short run than variable costs.
16-10.
Selling more units of a product or service (assuming the price is not changed) might be
good news. Having managers offer significant incentives (or, in the extreme, offering to
buy back unused product) might be an example of bad news, because these incentives
might result in lower profits.
16-11.
The action that management can take in response to price variances is probably quite
different than the action that can be taken in response to efficiency variances. The latter is
generally more subject to management control. Also, different departments might be
responsible for each variance. For example, purchasing might be responsible for the
materials price variance and production for the materials efficiency variance.
16-12.
This problem arises more frequently than one would hope. Because costs are
accumulated in responsibility centers usually according to where the cost is incurred, it is
quite likely that the production department will be charged with a cost that originated by
the action of some other (e.g., sales) department. In accepting the rush order, the sales
department would either have raised the selling price to compensate for the special
delivery or undertaken the rush order to avoid losing a sale. The extra costs incurred in
other departments as a direct result of the sales department's action should be chargeable
back to the sales department.
16- 3
Chapter 16 - Fundamentals of Variance Analysis
16-13.
Typically, the labor price variances are relatively small since the rates are usually
determined in advance through the union negotiation process. However, if a line manager
uses workers that are more skilled (and thus higher paid) than the labor that was
considered when preparing the budget, an unfavorable price variance would arise that
would be the responsibility of the line manager. Presumably, the manager would do this
only when the manager expected efficiency improvements at least equal to the
unfavorable price variance. If overtime premiums are not accounted for separately, then
unbudgeted overtime premiums could be the cause of price variances.
16-14.
False. The production volume variance arises because fixed overhead is applied over a
greater or lesser number of units than were used in deriving the fixed overhead application
rate. Hence, the production volume variance does not tell us whether we spent more or
less, but rather only that we produced more or less than expected.
16-15.
It is necessary to investigate the reasons why volume fell short of expectations. If
marketing was unable to sell the production then the marketing manager might be held
responsible. However, if production were operating inefficiently and, hence, not producing
at the level which marketing could handle then the matter could be turned around and
production should be held responsible for the shortfall. The point of the question is that
variances in one department (e.g., production) might arise due to activities in other
departments. While this occurs infrequently, it is worthy of investigation if managers
continue to argue that their performance is adversely affected by others actions.
16- 4
Chapter 16 - Fundamentals of Variance Analysis
Solutions to Exercises
16-16. (20 min.)Flexible Budgeting: Windsor, Inc.
Calculations: Master budget dollar amount
Sales revenue..................................................... unit =
90,000 units x $36 per
Variable costs...................................................... unit =
90,000 units x $15 per
Fixed costs..........................................................
3,240,000
$1,350,000
$900,000
Windsor, Inc.
Flexible Budget
Sales revenue..................................................... (= $36 x 92,000)
$3,312,000
Less:
Variable manufacturing costs.......................... (= $15 x 92,000)
1,380,000
Contribution margin.............................................
$1,932,000
Less:
Fixed manufacturing costs...............................
900,000
Operating profits..................................................
$1,032,000
16-17. (30 min.)Sales Activity Variance: Windsor, Inc.
Flexible Budget
(based on actual
of 92,000 units)
Sales revenue.....................................................
$3,312,000
Less:
Variable manufacturing costs..........................
1,380,000
Contribution margin.............................................
$1,932,000
Less:
Fixed costs.......................................................
900,000
Operating profits..................................................
$1,032,000
16- 5
Sales
Activity
Variance
$72,000 F
Master Budget
(based on
budgeted
90,000 units)
$3,240,000
30,000 U
$42,000 F
1,350,000
$1,890,000
________
$42,000 F
900,000
$990,000
Chapter 16 - Fundamentals of Variance Analysis
16-18. (30 min.)Profit Variance Analysis: Windsor, Inc.
Actual
(92,000
Manufacturing Sales Price Flexible Budget
Activity
Units)
Variances
Variance
(92,000 Units) Variance
Sales revenue.....................................................
$3,353,400a
$41,400 F
$3,312,000b $72,000 F
Less:
Variable manufacturing costs.......................... $248,400 U _________
1,628,400d
1,380,000e
30,000 U
Contribution margin............................................. 248,400 U
1,725,000
$41,400 F
$1,932,000
42,000 F
Less:
Fixed manufacturing costs..............................._________
900,000
900,000 ________
_________
_________
Operating profits.................................................. $248,400 U
$825,000
$41,400 F
$1,032,000
$42,000 F
Total Variance from Flexible Budget
$207,000 U (= $825,000 $1,032,000)
Total Variance from Master Budget
$165,000 U (= $825,000 $990,000)
a 92,000 units x $36.45
b 92,000 units x $36
c 90,000 units x $36
d 92,000 units x $17.70
e 92,000 units x $15
f 90,000 units x $15
16- 6
Master Budget
(90,000 Units)
$3,240,000c
1,350,000f
1,890,000
900,000
$990,000
Chapter 16 - Fundamentals of Variance Analysis
16-19. (20 min.) Flexible Budget.
a. $40,000
b. $8
per unit
VC = (TC FC) X
= ($120,000 $40,000) 10,000 units
c. $104,000
TC = F + VX
= $40,000 + ($8 x 8,000 units)
d. $168,000
TC = F + VX
= $40,000 + ($8 x 16,000 units)
16- 7
Chapter 16 - Fundamentals of Variance Analysis
16-20. (25 min.)Fill In Amounts On Flexible Budget Graph.
Computations:
(a)
Profit = (P V)X FC
$32,000 = (P V)(2,000 units) $200,000
$232,000
(P V) =
= $116 per unit
2,000 units
(b) $90,000 = $116 X $200,000
$116X = $90,000 + $200,000
$290,000
X=
= 2,500 units
$116
16- 8
Chapter 16 - Fundamentals of Variance Analysis
16-21. (25 min.)Flexible Budget.
Computations:
(a)
Profit = (P V)X FC
$6,000 = $4X $70,000
$4x = $6,000 + $70,000
$64,000
X=
= 16,000 units
$4
(b)
$36,000 = $4X $70,000
$4x = $36,000 + $70,000
$106,000
X=
= 26,500 units
$4
16- 9
Chapter 16 - Fundamentals of Variance Analysis
16-22. (35 min.)Prepare Flexible Budget: Data-2-Go.
Flexible
Budget
(based on
actual of
Calculations
750,000 units)
(000 omitted for units)
Sales revenue.....................................................
$5,625,000 $6,000,000 x (750 800)
Variable costs:
Blank drives..................................................... ,687,500
1
1,800,000 x (750 800)
Direct labor...................................................... 393,750
420,000 x (750 800)
Variable overhead............................................ 731,250
780,000 x (750 800)
Variable marketing and administrative............ 562,500
600,000 x (750 800)
Total variable costs.............................................
$3,375,000
Contribution margin.............................................
$2,250,000
Fixed costs:
Manufacturing overhead..................................
$ 1,200,000
Marketing......................................................... 360,000
Administrative.................................................. 225,000
Total fixed costs..................................................
$1,785,000
Operating profits..................................................465,000
$
16- 10
Chapter 16 - Fundamentals of Variance Analysis
16-23. (45 min.)Sales Activity Variance: Data-2-Go.
Flexible
Budget
(based on
actual of
750,000
units)
Sales revenue.....................................................
$5,625,000
Variable costs:
Blank drives.....................................................
1,687,500
Direct labor......................................................
393,750
Variable overhead............................................
731,250
Variable marketing and administrative............
562,500
Total variable costs.............................................
$3,375,000
Contribution margin.............................................
$2,250,000
Fixed costs:
Manufacturing overhead..................................
$ 1,200,000
Marketing.........................................................
360,000
Administrative..................................................
225,000
Total fixed costs..................................................
$1,785,000
Operating profits..................................................
$465,000
16- 11
$375,000 U
Master
Budget
(based on
budgeted
800,000
units)
$6,000,000
112,500 F
26,250 F
48,750 F
37,500 F
$225,000 F
$150,000 U
1,800,000
420,000
780,000
600,000
$3,600,000
$2,400,000
Sales Activity
Variance
$150,000 F
$
1,200,000
360,000
225,000
$1,785,000
$ 615,000
Chapter 16 - Fundamentals of Variance Analysis
16-24. (30 min.)Profit Variance Analysis: Data-2-Go.
Flexible
Budget
(based on
Sales
750,000
Activity
units)
Variance
$5,625,000 $375,000 U
1,687,500 112,500 F
393,750
26,250 F
731,250
48,750 F
Actual
Marketing and
(based on
Administrative
750,000
Manufacturing Variances Sales Price
units)
Variances
Variance
Sales revenue.....................................................
$6,210,000
$585,000 F
Blank drives.........................................................
1,800,000
$112,500 U
Direct labor..........................................................
345,000
48,750 F
Variable manufacturing.......................................
843,000
111,750 U
Variable marketing and
administrative...................................................
585,000
$22,500 U
562,500
37,500 F
Total variable costs.............................................
$3,573,000
$175,500 U
$22,500 U
$3,375,000 $225,000 F
Contribution margin.............................................
$2,637,000
$175,500 U
$22,500 U $585,000 F $2,250,000 $150,000 U
Fixed costs:
Manufacturing
1,236,000
36,000 U
$ 1,200,000
Overhead.............................................................
Marketing.........................................................
360,000
0
360,000
Administrative..................................................
255,000
30,000 U
225,000
Total fixed costs..................................................
$1,851,000
$ 36,000 U
$30,000 U
0 $1,785,000
0
Operating profits..................................................
$ 786,000
$211,500 U
$52,500 U $585,000 F
$465,000 $150,000 U
16- 12
Master
Budget
(based on
800,000
units)
$6,000,000
1,800,000
420,000
780,000
600,000
$3,600,000
$2,400,000
$
1,200,000
360,000
225,000
$1,785,000
$ 615,000
Chapter 16 - Fundamentals of Variance Analysis
16-25. (15 min.)Assigning Responsibility: Wallace Manufacturing.
Answers will vary. This situation is a normal part of a production departments business
and would probably be charged to the production department. In the future, it would be
beneficial for the production department to be able to rely on the purchasing departments
work with reasonable assurance. The purchasing department should be charged for the
rework if the mistake was due to negligence on the part of the purchasing department to
give them incentives to do the job right.
16-26. (15 min.)Assigning Responsibility: Davidson Communications.
It appears that the Building 404 manager acted against the best interests of the company
by refusing to shut down production temporarily. This refusal cost the company $75,000
and much time and effort including the opportunity cost of lost profits due to returns and
warranty repair costs. However, management is also to blame for giving the Building 404
manager the wrong incentives. Hopefully this incident will not happen again and
production managers will be given proper incentives to cooperate, so the $75,000 could
be written off as an abnormal expense for the period.
16-27. (10 min.)Variable Cost Variances.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
$28 x 1,600
= $44,800
$45,000
$200 U
$28 x .25 x 5,600
= $39,200
$5,600 U
16- 13
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
Chapter 16 - Fundamentals of Variance Analysis
16-28.
(20 min.)Variable Cost Variances: Sills, Inc.
Direct labor:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Flexible Budget
(Standard
Efficiency
Inputs Allowed
Variance
for Good
Output)
$20.25a x 27,000
= $546,750
$546,000 19,500
= $526,500
$546,000
$19,500 U
$20,250 F
Variable overhead:
$5.25 x 26,000
= $136,500
$132,600
$3,900 F
aStandard
$5.25 x 27,000
= $141,750
$5,250 F
labor wage rate
= (Actual Direct Labor Direct Labor Price Variance) Actual hours worked
= ($546,000 $19,500) 26,000 hrs. = $20.25
16- 14
Chapter 16 - Fundamentals of Variance Analysis
16-29.
(20 min.)Variable Cost Variances: Simon Company.
Direct labor:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Flexible Budget
(Standard
Efficiency
Inputs Allowed
Variance
for Good
Output)
$20a x 1.5 x
60,000
= $1,800,000
$20a x 92,000
= $1,840,000
$1,975,000
$135,000 U
$40,000 U
Variable overhead:
$200,000 F
aStandard
$30 x 1.5 x
60,000
= $2,700,000
$30 x 92,000
= $2,760,000
$2,560,000
$60,000 U
labor wage rate
= [(Direct labor efficiency variance) Variable overhead efficiency variance)] x $30.
= [$40,000 $60,000] x $30 = $20
16- 15
Chapter 16 - Fundamentals of Variance Analysis
16-30. (15 min.)Variable Cost Variances: Thurmster Corporation.
a.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
$12.60 x 7,500
= $94,500
$98,550
$4,050 U
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$89,775
$4,725 U
Report to management:
The total variance from the flexible budget is $8,775 unfavorable. This variance was
caused by higher than expected prices ($4,050) and the use of more units than
expected ($4,725).
b.
Work-in-Process Inventory..................................
89,775
Materials Price Variance.....................................
4,050
Materials Efficiency Variance..............................
4,725
Accounts Payable.............................. 98,550
To record the purchase and use of 7,500 units of
materials at an actual cost of $98,550 and the transfer to
work in process at a standard cost of $12.60 per unit.
16- 16
Chapter 16 - Fundamentals of Variance Analysis
16-31. (20 min.)Variable Cost Variances: Canyon Chemical.
a.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
$22.50 x 28,800
= $648,000
$640,000
$8,000 F
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
$22.50 x 26,400
= $594,000
$54,000 U
b.
Work-in-Process Inventory..................................
594,000
Materials Efficiency Variance..............................
54,000
Materials Price Variance..............................
8,000
Accounts Payable........................................ 640,000
To record the purchase and use of 28,800 gallons of
chemical Y at an actual cost of $640,000 and the transfer
to work in process at a standard cost of $22.50 per gallon.
16- 17
Chapter 16 - Fundamentals of Variance Analysis
16-32. (20 min.)Fixed Cost Variances: Carney Co.
Actual
Costs
Price
Variance
$385,500
Budget
Production
Volume
Variance
$369,000
$16,500 U
$360,000
$9,000 U
$25,500 U
16-33. (15 min.) Fixed Cost Variances: Carney Co.
16- 18
Applied
Chapter 16 - Fundamentals of Variance Analysis
16-34. (20 min.)Fixed Cost Variances: Hilo Corporation.
Actual
Costs
Price
Variance
$390,660
Budget
Production
Volume
Variance
$3.30 x 128,000
= $422,400
$407,160
$16,500 F
$15,240 F
$31,740 F
16- 19
Applied
Chapter 16 - Fundamentals of Variance Analysis
16-35. (20 min.) Fixed Cost Variances: Stoker Corporation.
Actual
Costs
$413,000
Price
Variance
Budget
Production
Volume
Variance
$0.50 x 800,000b
= $400,000
$0.50 x 806,000a
$403,000
c
$10,000 U
Applied
$3,000 U
$13,000 F
a. Budgeted volume = $403,000 $0.50 per unit = 806,000 units.
b. Overhead applied = Budgeted overhead Production volume variance
= $403,000 $3,000 = $400,000.
Actual volume = $400,000 $0.50 per unit = 800,000 units.
c. Actual fixed overhead = Budgeted overhead + Overhead price variance
= $403,000 + $10,000 = $413,000
16- 20
Chapter 16 - Fundamentals of Variance Analysis
16-36. (45 min.)Comprehensive Cost Variance Analysis: Wagner, Inc.
a. Variable cost:
Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$2.70 x 192,000
= $518,400
$3.00 x 192,000
= $576,000
$3 x 4 lbs x 46,000
= $552,000
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$57,600 F
Efficiency
Variance
$24,000 U
Direct labor:
$13.80 x 35,200
= $485,760
$13.50 x 0.8 hrs x
46,000
= $496,800
$13.50 x 35,200
= $475,200
$10,560 U
$21,600 F
Variable overhead:
$15 x 8,640
= $129,600
$132,192
$2,592 U
$15 x 0.18 hrs x 46,000
= $124,200
$5,400 U
16- 21
Chapter 16 - Fundamentals of Variance Analysis
16-36. (continued)
b. Fixed overhead variances:
Actual
Costs
Price
Variance
$1,075,000
Budget
Production
Volume
Variance
$20 x 46,000
= $920,000
$1,000,000
$75,000 U
$80,000 U
$155,000 U
16- 22
Applied
Chapter 16 - Fundamentals of Variance Analysis
16-36. (continued)
c.
Record Costs
Direct materials:
Work-in-Process Inventory.................................. 552,000
Materials Efficiency Variance.............................. 24,000
Materials Price Variance
57,600
....................................................
Accounts Payable
518,400
....................................................
Direct labor:
Work-in-Process Inventory.................................. 496,800
Direct Labor Price Variance................................
10,560
Direct Labor Efficiency Variance
21,600
.......................................................
Accounts Payable
485,760
.......................................................
Variable overhead:
Work-in-Process Inventory..................................
Variable Overhead Applied
........................................................
124,200
124,200
Variable Overhead (Actual).................................
Miscellaneous Payables and Inventory
Accounts.................................................
132,192
Variable Overhead (Applied)...............................
Variable Overhead Price Variance......................
Variable Overhead Efficiency Variance..............
Variable Overhead (Actual)
..................................................
124,200
2,592
5,400
132,192
132,192
Fixed overhead:
Work-in-Process Inventory..................................
Fixed Overhead Applied
........................................................
920,000
920,000
Fixed Overhead (Actual).....................................
Miscellaneous Payables and Inventory
Accounts
1,075,000
16- 23
1,075,000
Chapter 16 - Fundamentals of Variance Analysis
.......................................................................
Fixed Overhead (Applied)...................................
Fixed Overhead Production Volume Variance....
Fixed Overhead Price Variance..........................
Fixed Overhead (Actual)
........................................................
16- 24
920,000
80,000
75,000
1,075,000
Chapter 16 - Fundamentals of Variance Analysis
16-36. (continued)
Transfer to Finished Goods
Finished Goods Inventory............................................
Work-in-Process Inventory.............................
2,093,000
2,093,000
Record the sale of 46,000 tires at $60.
Accounts Receivable.................................................... 2,760,000
Sales Revenue
2,760,000
...........................................................................
Cost of Goods Sold...................................................... 2,093,000
Finished Goods Inventory
2,093,000
...........................................................................
Record the disposition of variances.
Cost of Goods Sold...........................................................
Materials Price Variance...................................................
Direct Labor Efficiency Variance.......................................
Materials Efficiency Variance.............................
Direct Labor Price Variance...............................
Variable Overhead Price Variance....................
Variable Overhead Efficiency Variance.............
Fixed Overhead Price Variance.........................
Fixed Overhead Production Volume Variance. .
To close the variance accounts to Cost of Goods Sold.
118,352
57,600
21,600
24,000
10,560
2,592
5,400
75,000
80,000
Total cost of goods sold is $2,211,352 (= $2,093,000 + $118,352). Total actual costs are
$2,211,352 (= $518,400 + 485,760 +132,192 + $1,075,000).
16- 25
Chapter 16 - Fundamentals of Variance Analysis
16-37. (30 min.)Comprehensive Cost Variance Analysis: Pueblo Service.
a. Variable cost variances:
Oil specialist:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$13 x 79,200a
= $1,029,600
$12 x 79,200 hrs
= $950,400
$12 x 66,000b
= $792,000
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$79,200 U
Efficiency
Variance
$158,400 U
Variable overhead:
$7.5 x 0.14 hrs
x 396,000
= $415,800
$8 x 0.14 hrs
x 396,000
= $443,520
$27,720 F
a 79,200
= 1/6 hour x 396,000 changes.
c 49,500
$47,520 U
= 0.20 hours x 396,000 changes.
b 66,000
$8 x 49,500 hoursc
= $396,000
= 0.125 hour x 396,000 changes.
16- 26
Chapter 16 - Fundamentals of Variance Analysis
16-37. (continued)
b. Fixed overhead variances:
Actual
Costs
Price
Variance
$500,000
Budget
Production
Volume
Variance
$1.20 x 396,000
= $475,200
$432,000
$68,000 U
$43,200 F
$24,800 U
16- 27
Applied
Chapter 16 - Fundamentals of Variance Analysis
16-38. (20 min.)Overhead Variances: Three Bridges, Inc.
Variable overhead:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$456,000
$36 x 13,200
= $475,200
$36 x 14,000
= $504,000
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$19,200 F
Efficiency
Variance
$28,800 F
Fixed overhead:
Actual
Costs
Price
Variance
Budget
$182,400
$187,200
$4,800 F
16- 28
Chapter 16 - Fundamentals of Variance Analysis
Solutions to Problems
16-39. (30 min.)Solve for Master Budget Given Actual Results: Gibson
Corporation.
a.
Master Budget
Computations
Sales volume.......................................................nits
108,000 u
Sales revenue.....................................................
$540,000
Variable costs:
Manufacturing..................................................
106,000
Marketing and administrative...........................
54,000
Contribution margin.............................................
$ 380,000
Fixed costs:
Manufacturing..................................................
216,000
Marketing and administrative...........................
56,000
Operating profit....................................................
$ 108,000
16- 29
108,000 units x $5
$540,000 $54,000 $380,000
10% x $540,000
(given)
$2 x 108,000 units
$380,000 $216,000 $108,000
$1 x 108,000 units
Chapter 16 - Fundamentals of Variance Analysis
16-39. (continued)
b.
Marketing
Actual
Manuand Adminis- Sales Price
(120,000
facturing
trative
Variance
Units)
Variances
Variances
Sales revenue.....................................................
$672,000
$72,000 F
Variable costs:
Manufacturing..................................................U
147,200 $29,422
Marketing and admin.......................................
61,400 ________
$1,400 U ________
Contribution margin.............................................U
$463,400 $29,422
$ 1,400 U
$72,000 F
Fixed costs:
Manufacturing.................................................. F
205,000
11,000
Marketing and admin.......................................
113,200 ________
57,200 U ________
Operating profit....................................................U
$145,200 $18,422
$58,600 U
$72,000 F
a 120,000
Flexible
Budget
(120,000
Units)
$600,000a
$60,000 F
Master
Budget
(108,000
Units)
$540,000
117,778d
60,000c
$422,222b
11,778 U
6,000 U
$42,222 F
106,000
54,000
$380,000
216,000
56,000
$150,222
$42,222 F
216,000e
56,000g
$108,000f
Sales Activity
Variance
units x $5
b $380,000
x 120,000 units
108,000 units
c 10% x $600,000
d Solved after determining flexible budget sales revenue, contribution margin, and variable marketing and administrative.
Also, $117,778 = $106,000 x (120,000 units 108,000 units).
e $2 x 108,000.
f $1 x 108,000.
g $380,000 $216,000 $108,000.
16- 30
Chapter 16 - Fundamentals of Variance Analysis
16-40. (30 min.)Find missing data for profit variance analysis.
Marketing
& AdminisFlexible
Master
Actual
Manutrative
Sales
Budget
Sales
Budget
(1,500
facturing revenue.....................................................
$78,000
$3,000 Variance
Price
1,500a
Activity
(1,600
Units)
Variance
Variance
Units)
Variance
Units)
Sales Ub $81,000 $5,400 Uc $86,400d
Variable manufacturing costs.............................. e $2,400 F
20,400
22,800f 1,520 F
24,320g
Variable marketing and administrative................ h
8,000
$1,000 Fi
9,000j
600 Fk
9,600
Contribution margin.............................................
$49,600 $2,400 Fl $1,000 Fm $3,000 Un $49,200o $3,280 Up $52,480q
Note: See computations on next page.
16- 31
Chapter 16 - Fundamentals of Variance Analysis
16-40. (continued)
(a) 1,500 units from actual column.
(b) $3,000 U = $81,000 $78,000.
(c), (d) Budgeted sales price per unit = $81,000 1,500 units = $54.
Master budget = $54 x 1,600 units = $86,400 (d).
Activity variance = $86,400 $81,000 = $5,400 U (c).
(e), (f), (g) Budgeted variable manufacturing cost per unit = $1,520 (1,600 1,500
units) = $15.20.
Flexible budget variable manufacturing costs = $15.20 x 1,500 units = $22,800(f)
[= ($1,520 $5,400) x $81,000].
Master budget variable manufacturing costs = $15.20 x 1,600 units = $24,320 (g)
[= ($1,520 $5,400) x $86,400].
Actual variable manufacturing costs = $22,800 $2,400 = $20,400 (e).
(h) Variable marketing and administrative costs = $78,000 $20,400 $49,600 = $8,000.
(i), (j), (k)
Budgeted variable marketing and administrative costs per unit = $9,600
1,600 units = $6.00.
Flexible budget marketing and administrative costs = $6.00 x 1,500 units = $9,000 (j).
Variable marketing and admin. costs that are part of the activity variance = $6.00 x 100
units = $600 F (k) = $9,600 $9,000.
Marketing and administrative cost variance = $9,000 $8,000 = $1,000 F (i).
(l), (m), (n), (o), (p), and (q) are column totals.
16- 32
Chapter 16 - Fundamentals of Variance Analysis
16-41. (40 min.)Find Data for Profit Variance Analysis.
Actual
(based on
actual sales
volume)
Manufacturing
Variance
Units....................................................................
6,000 a
Sales revenue.....................................................
$24,750 g
Less:
Variable
manufacturing costs....................................... U o
13,125 n
$1,125
Variable marketing
and
administrative costs......................................
2,700
Contribution margin............................................. U
$8,925 q
$1,125
Less:
Fixed manufacturing
costs.............................................................. F
2,875 r
250
Fixed marketing and
administrative costs.......................................
2,250
Operating profits.................................................. U u
$3,800 t
$875
Master
Flexible
Budget
Budget
(based on
Marketing and
(based on
budgeted
Administrative Sales Price actual sales Sales Activity
sales
Variance
Variance
volume)
Variance
volume)
$300 F p
$300 F s $2,250 F x
1,000 F
$3,750 F i
5,000
$18,750
12,000
$2,250 F
6,000 b
$22,500 h
2,000 U j
10,000
3,000
$7,500
500 U
$1,250 F k
3,125 m
375 U v
$ 75 U w $2,250 F
Note: See computations on next page.
16- 33
1,875
$2,500
2,500 c
$6,250
3,125 d
$1,250 F l
1,875 e
$1,250 f
Chapter 16 - Fundamentals of Variance Analysis
16-41. (continued)
Computations:
a. 6,000 units.
b. 6,000 units.
c. $2,500
d. $3,125
e. $1,875
f. $1,250
g. $24,750
h. $22,500
i. $3,750 F
j. $2,000 U
k. $1,250 F
l.
m.
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
$1,250 F
$3,125
$13,125
$1,125 U
$300 F
$8,925
$2,875
$300 F
$3,800
$875 U
$375 U
$75 U
$2,250 F
see b.
5,000 units* + 1,000 F units.
$18,750* $10,000* $6,250*.
Same as m.
Fixed costs in master budget are the same as the fixed costs in the
flexible budget.
$6,250* $3,125 (d) $1,875 (e).
$22,500 (h) + $2,250*.
6,000 units (b) x ($18,750* 5,000 units*).
Alternative computation:
$12,000* + $3,000* + $7,500*.
$22,500 (h) $18,750*.
Alternative computation:
1,000 F units* x $3.75 selling price (= $18,750 5,000 units).
$12,000* $10,000*.
$7,500* $6,250*.
Alternative computation:
$3,750 F (i) $2,000 U (j) $500 U*.
Same as k.
$7,500* $1,875* $2,500*.
$12,000* + $1,125 (o).
Total manufacturing variance on the contribution margin line.
$3,000* $2,700*.
$24,750 (g) $13,125 (n) $2,700*.
$3,125 (m) $250 F*.
Same as p.
$8,925 (q) $2,875 (r) $2,250*.
$1,125 U* $250 F*.
$2,250* $1,875*.
$300 F (s) $375 U (v).
Sales price variance.
*Given
16- 34
Chapter 16 - Fundamentals of Variance Analysis
16-42. (20 min.)Ethical Issues In Managing Reported Profits: Doak Industries.
Ray is trying to improve the profit on next years income statement. He knows that a
revised budget to reflect changes in product lines might make it harder to get a bonus next
year. Since he has reached a plateau on this years bonus, anything he can do to increase
next years profit will help him get a bonus next year. This is an unethical practice. Ray
must perform his professional duties with competence. He must prepare reports in
accordance with technical standards and generally accepted accounting principles.
Revenues and expenses must be matched to the correct period to which they belong.
Ray faces a conflict of interest between communicating information fairly and objectively
and achieving high bonuses. He should meet with his superiors, point out the conflict, and
try to change the incentive system. If this is not possible, he should communicate his
performance truthfully.
16- 35
Chapter 16 - Fundamentals of Variance Analysis
16-43. (20 min.)Prepare Flexible Budget: Tolstoy Corporation.
Flexible
Budgeta
Calculations
Sales revenue..................................................... $60,000 x (360 400)
$54,000
Variable costs:
Manufacturing costs
Direct labor.................................................... 9,000 x (360 400)
8,100
Materials........................................................ 8,400 x (360 400)
7,560
Variable overhead......................................... 6,000 x (360 400)
5,400
Marketing......................................................... 3,600 x (360 400)
3,240
Administrative.................................................. 3,000 x (360 400)
2,700
Total variable costs.............................................
$27,000
Contribution margin.............................................
$27,000
Less fixed costs: .................................................
Manufacturing................................................
3,000
Marketing.......................................................
6,000
Administrative................................................
6,000
Total fixed costs..................................................
$15,000
Operating profit....................................................
$12,000
revenue and the variable costs are 90 percent (360 units 400 units x 100%) of
the master budget amounts.
a Sales
16- 36
Chapter 16 - Fundamentals of Variance Analysis
16-44. (20 min.)Sales Activity Variance: Tolstoy Corporation.
Flexible
Budget
(based on
actual of
360 units)
Sales Activity
Variance
Sales revenue.....................................................
$54,000
Less variable costs:
Manufacturing costs:
Direct labor...................................................
8,100
Materials.......................................................
7,560
Variable overhead........................................
5,400
Marketing.........................................................
3,240
Administrative..................................................
2,700
Total variable costs.............................................
$27,000
Contribution margin.............................................
$27,000
Less fixed costs:
Manufacturing..............................................
3,000
Marketing.....................................................
6,000
Administrative...............................................
6,000
Total fixed costs..................................................
$15,000
Operating profits..................................................
$12,000
16- 37
Master Budget
(based on
budgeted 400
units)
$6,000 U
$60,000
900 F
840 F
600 F
360 F
300 F
$ 3,000 F
$ 3,000 U
9,000
8,400
6,000
3,600
3,000
$30,000
$30,000
-0-0-0-0$3,000 U
3,000
6,000
6,000
$15,000
$15,000
Chapter 16 - Fundamentals of Variance Analysis
16-45. (30 min.) Profit variance analysis: Tolstoy Corporation.
Actual
(360 Units)
Manufacturing
Variance
Sales revenue.....................................................
$55,200
Variable costs:
Manufacturing
Direct labor................................................... U
8,520
$420
Materials....................................................... F
7,200
360
Overhead..................................................... F
4,920
480
Marketing.........................................................
3,180
Administrative..................................................
3,000
Contribution margin............................................. F
$28,380
$420
Fixed costs:
Manufacturing.................................................. F
2,916
84
Marketing.........................................................
6,240
Administrative..................................................
5,976
Operating profit.................................................... F
$13,248
$504
Marketing &
Administrative Sales Price
Variance
Variance
Flexible
Sales
Budget
Activity
(360 Units) Variance
Master
Budget
(400 Units)
$1,200 F
$60 F
300 U
$240 U
240 U
24 F
$456 U
16- 38
$54,000
$6,000 U
$60,000
$1,200 F
8,100
7,560
5,400
3,240
2,700
$27,000
900 F
840 F
600 F
360 F
300 F
$3,000 U
9,000
8,400
6,000
3,600
3,000
$30,000
$1,200 F
3,000
6,000
6,000
$12,000
$3,000 U
3,000
6,000
6,000
$15,000
Chapter 16 - Fundamentals of Variance Analysis
16-46. (20 min.)Prepare Flexible Budget: Hayden Corporation.
Flexible Budgeta
Sales revenue.....................................................
$1,260,000
Variable costs:
Manufacturing costs
Direct labor....................................................
126,000
Materials........................................................
168,000
Variable overhead.........................................
168,000
Marketing.........................................................
52,500
Administration..................................................
52,500
Total variable costs.............................................
$567,000
Contribution margin.............................................
$693,000
Less fixed costs: .................................................
Manufacturing................................................
250,000
Marketing.......................................................
50,000
Administration.................................................
200,000
Total fixed costs..................................................
$500,000
Operating profit....................................................
$193,000
Calculations
$1,200,000 x (21,000 20,000)
120,000
160,000
160,000
50,000
50,000
x
x
x
x
x
(21,000 20,000)
(21,000 20,000)
(21,000 20,000)
(21,000 20,000)
(21,000 20,000)
revenue and the variable costs are 105 percent (21,000 units 20,000 units x
100%) of the master budget amounts.
a Sales
16- 39
Chapter 16 - Fundamentals of Variance Analysis
16-47. (20 min.)Sales Activity Variance: Hayden Corporation
Flexible
Budget
(based on
actual of
21,000 units)
Sales Activity
Variance
Sales revenue..................................................... $60,000 F
$1,260,000
Less variable costs:
Manufacturing costs:
Direct labor...................................................
126,000
6,000 U
Materials.......................................................
168,000
8,000 U
Variable overhead........................................
168,000
8,000 U
Marketing.........................................................
52,500
2,500 U
Administration..................................................
52,500
2,500 U
Total variable costs............................................. $27,000 U
$567,000
Contribution margin............................................. $ 33,000 F
$693,000
Less fixed costs:
Manufacturing..............................................
250,000
-0Marketing.....................................................
50,000
-0Administration..............................................
200,000
-0Total fixed costs..................................................
$500,000
-0Operating profits.................................................. $33,000 F
$193,000
16- 40
Master Budget
(based on
budgeted
20,000 units)
$1,200,000
120,000
160,000
160,000
50,000
50,000
$540,000
$660,000
250,000
50,000
200,000
$500,000
$160,000
Chapter 16 - Fundamentals of Variance Analysis
16-48. (30 min.) Profit variance analysis: Hayden Corporation.
Actual
(21,000 Units)
Manufacturing
Variance
Sales revenue.....................................................
$1,155,000
Variable costs:
Manufacturing
Direct labor................................................... U
147,000
$21,000
Materials....................................................... F
136,500
31,500
Overhead..................................................... F
158,500
9,500
Marketing.........................................................
51,000
Administration..................................................
47,000
Contribution margin............................................. F
$615,000
$20,000
Fixed costs:
Manufacturing.................................................. U
256,000
6,000
Marketing.........................................................
57,000
Administration..................................................
203,000
Operating profit.................................................... F
$99,000
$14,000
Marketing &
Administration Sales Price
Variance
Variance
Flexible
Budget
(21,000
Units)
Sales
Activity
Variance
Master
Budget
(20,000
Units)
$105,000 U
$1,260,000 $60,000 F
$1,200,000
$1,500 F
5,500 F
$7,000 F $105,000 U
126,000
6,000 U
168,000
8,000 U
168,000
8,000 U
52,500
2,500 U
52,500
2,500 U
$693,000 $33,000 F
120,000
160,000
160,000
50,000
50,000
$660,000
7,000 U
3,000 U
$3,000 U $105,000 U
250,000
50,000
200,000
$193,000 $33,000 F
250,000
50,000
200,000
$160,000
16- 41
Chapter 16 - Fundamentals of Variance Analysis
16-49. (15 min.) Direct Materials: Clearwater Company.
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$20 x 900
=$18,000
AP x 900
$7,200 F
900 x AP
AP
= $18,000 $7,200
= $12
16- 42
Chapter 16 - Fundamentals of Variance Analysis
16-50. (20 min.)Solve for Direct Labor Hours: Thomas Company.
Set up variance model:
Actual
Costs
Price
Variance
$21.60 x AQ
Actual Inputs
at Standard
Price
Efficiency
Variance
$21.00 x 5,600
= $117,600
$21.00 x AQ
??
$16,800 F
Solve for actual input at standard prices:
$117,600 $16,800 favorable efficiency variance = $100,800.
Solve for AQ:
$21.00 x AQ = $100,800
AQ = $100,800 $21.00
AQ = 4,800 hours
Solve for labor price variance:
Labor price variance = ($21.60 x 4,800 hours) $100,800
= $103,680 $100,800
Labor price variance = $2,880 U
16- 43
Flexible Budget
(Standard
Inputs Allowed
for Good
Output)
Chapter 16 - Fundamentals of Variance Analysis
16-51. (20 min.) Overhead Variances: Lima Parts, Inc.
Variable overhead:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
Efficiency
Variance
$18 x 2,200
= $39,600
$39,200a
$400 F
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
$18 x 2,350
= $42,300
$2,700 F
Fixed overhead:
Actual
Costs
Price
Variance
Budget
$19,600b
$17,280
$2,320 U
a
b
$39,200 = (2/3) x $58,800.
$19,600 = (1/3) x $58,800.
16- 44
Chapter 16 - Fundamentals of Variance Analysis
16-52. (40 min.)Manufacturing Variances: Clemson Company.
Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$5.40 x 4,200
gallons
= $22,680
$6 x 4,200
gallons
= $25,200
$6 x 2 gallons x 1,900
units
= $22,800
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$2,520 F
Efficiency
Variance
$2,400 U
Direct labor:
$30 x 6,400
= $192,000
$24 x 6,400
= $153,600
$38,400 U
$24 x 4 hours x 1,900
= $182,400
$28,800 F
Variable overhead:
$6 x 6,400
= $38,400
$54,000
$15,600 U
$6 x 4 hours x 1,900
= $45,600
$7,200 F
16- 45
Chapter 16 - Fundamentals of Variance Analysis
16-53. (20 min.) Overhead Cost and Variance Relationships: Fargo Corporation.
a. Variable overhead:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$12a x 21,200
hours
= $254,400
$254,000
$400 F
a $12 =
b.
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
$12 x 21,400 hours
= $256,800
$2,400 F
$256,800 flexible budget
21,400 hours
Fixed overhead:
Actual
Costs
Price
Variance
$180,800a
Budget
= $434,800 $254,000
b $184,800
= $180,800 + $4,000 F price variance.
=
$184,800
22,000 hours
16- 46
Applied
$8.40c x 21,400
= $179,760
$5,040 U
a $180,800
$8.40
Production
Volume
Variance
$184,800b
$4,000 F
c
Efficiency
Variance
Chapter 16 - Fundamentals of Variance Analysis
16-54. (20 min.) Analysis of Cost Reports: Cabot Plant.
Three possible changes that could make the cost information more meaningful are:
a. Use a flexible budget rather than a static master budget for measuring performance so
that changed conditions, volume changes, and fixed versus variable costs are
recognized in the reporting process.
b. Use standard costs.
c. Identify those elements of the report for which the production manager is directly
responsible.
16-55. (25 min.)Change Of Policy To Improve Productivity: Osage Electronics.
Currently the soldering personnel rarely complete the operations in less time than the
standard allows. Assuming that the soldering department is working efficiently, it is not
likely that the tightening of the standards (reducing the allowed time per operation) will
result in increased productivity. More likely the soldering personnel will resent having the
standards tightened without their input into the decision making process. They currently
view the standards as achievable since they do, although rarely, complete the operations
in less than the standard time. Tightening the standards will result in decreased motivation
and morale as they strive for what they will view as an unrealistic standard.
Improved profit margins will not be achieved. The production manager fails to understand
that by tightening the standards (all other things being equal) she will simply increase the
unfavorable variances. Simply lowering the standard time allowed per operation does not
reduce the cost of manufacturing the product, unless an actual reduction in processing
time occurs on the shop floor. As stated above the tightening of the standards will
probably decrease morale and motivation resulting in an increased processing time. This
will decrease productivity and increase the costs of production.
16-56. (20 min.)Ethics and Standard Costs: Farmer Franks.
Margaret's behavior is unethical. Margaret has an obligation to communicate information
fairly and objectively. She must prepare complete and clear reports and
recommendations. By misrepresenting the costs of the blueberries she is hoping to benefit
her friend's blueberry farm at the expense of Farmer Franks. Margaret should avoid such
conflicts of interest, and advise all parties of any potential conflicts. She should not be
setting the standards and mandating from whom Franks should purchase the goods.
16- 47
Chapter 16 - Fundamentals of Variance Analysis
16-57. (40 min.) Comprehensive Variance Problem: Trenton Manufacturing
Company.
Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$6.15 x 9,500
yards
= $58,425
$6.00 x 9,500
yards
= $57,000
$6.00 x 20 yards x 500
units
= $60,000
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$1,425 U
Efficiency
Variance
$3,000 F
Direct labor:
$5.10 x 12,600
hours
= $64,260
$5 x 25 hours
x 500 units
= $62,500
$5 x 12,600
hours
= $63,000
$1,260 U
$500 U
16- 48
Chapter 16 - Fundamentals of Variance Analysis
16-57. (continued)
Variable overhead:
Actual Inputs
at Standard
Price
$3a x 12,600
hours
= $37,800
??
Flexible Budget
Efficiency (Standard Inputs
Variance
Allowed for
Good Output)
$3 x 25 hours x
500 units
= $37,500
$300 U
Fixed overhead:
Budget
Production
Volume
Variance
$1b x 14,400
hours
= $14,400
??
Applied
$1 x 25 hours x
500 units
= $12,500
$1,900 U
a $3
per hour = $75 standard overhead per unit 25 direct labor hours per unit.
b $1
per hour = $25 standard overhead per unit 25 direct labor hours per unit.
Note: The variable overhead and fixed overhead price variances cannot be determined.
The total overhead price variance is $3,300 U (= $55,500 $37,800 $14,400).
16- 49
Chapter 16 - Fundamentals of Variance Analysis
16-58. (25 min.)Find Actual And Budget Amounts From Variances: Timekiller, Inc.
a. Direct materials:
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
(AP x AQ)
(SP x AQ)
$472,500*
Efficiency
Variance
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$4* x 112,500 kgs*
= $450,000
$22,500 U*
$4* x 4.5 kgs
x 24,000 units*
= $432,000
$18,000 U*
Direct labor:
$16.80 x 17,100*
hours
= $287,280*
$16 x 0.75 hours
x 24,000 units
= $288,000
$16 x 17,100*
hours
= $273,600
$13,680 U*
$14,400 F
Standard cost sheet:
Direct materials, 4.5 kilograms at $4 per kilogram.
Direct materials, 0.75 hours at $16 per hour..........
Overhead, 0.75 hours at $12 per hour...................
Total costs.........................................................
* Given
16- 50
$18
12
9
$39*
per game
per game
per game
per game
Chapter 16 - Fundamentals of Variance Analysis
16-58. (continued)
b. Overhead:
Actual
Costs
Applied
$216,000 + $9,000
= $225,000
$9 x 24,000
= $216,000
$9,000 U*
* Given
16- 51
Chapter 16 - Fundamentals of Variance Analysis
16-59. (40 min.)Variance Computations With Missing Data: Studio Company.
Note: The calculation of the fixed overhead budget amount makes this a challenging
problem. (Footnotes follow the calculations.)
Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$1.85a x 81,600
gallons
=$150,960
$1.65 x 81,600
gallons
= $134,640
$1.65 x 2 gallons
x 42,000 units
= $138,600
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$16,320 U
Efficiency
Variance
$3,960 F
Direct labor:
$13.05b x 8,560
hours
= $111,708
$14 x 0.2 hours
x 42,000 units
= $117,600
$14 x 8,560
hours
= $119,840
$8,132 F
$2,240 U
Variable overhead:
$11.90 x 0.2 hours
x 42,000 units
= $99,960
$11.90 x 8,560
hours
= $101,864
61% x $163,200
= $99,552
$2,312 F
$1,904 U
16- 52
Chapter 16 - Fundamentals of Variance Analysis
16-59. (continued)
Fixed overhead:
Actual
Costs
Price
Variance
39% x $163,200
= $63,648
Budget
Production
Volume
Variance
$1.60d x 42,000
= $67,200
$64,000c
$352 F
a $1.85
=
=
$3,200 F
$150,960
81,600 gallons
b $13.05
Applied
$111,708
8,560 hours
c There
are 40,000 units in the master production budget, computed by dividing total
master budget costs by standard unit cost as follows:
Materials: 132,000 ($1.65 x 2 gallons)
= $132,000 $3.30 = 40,000 units.
Labor:
$112,000 ($14.00 x 0.2 hour)
= $112,000 $2.80 = 40,000 units.
This means the master budget variable overhead amount is $95,200 = $11.90 x 0.2 hour x
40,000 units. So the fixed overhead budget is $64,000 = $159,200 $95,200.
d
$1.60 =
$64,000 budget
40,000 units
16- 53
Chapter 16 - Fundamentals of Variance Analysis
(50 min.) Comprehensive Variance Problem: Sweetwater Company
16-60.
Mountain Mist:
a. Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$13.50 x 3,100
ounces
=$41,850
$15 x 3,100
ounces
= $46,500
$15 x 3 ounces
x 1,000 units
= $45,000
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$4,650 F
Efficiency
Variance
$1,500 U
Direct labor:
$60.75 x 4,900
hours
= $297,675
$60 x 5 hours
x 1,000 units
= $300,000
$60 x 4,900
hours
= $294,000
$3,675 U
$6,000 F
Variable overhead:
$48 x 5 hours
x 1,000 units
= $240,000
$48 x 4,900
hours
= $235,200
$242,550
$7,350 U
$4,800 F
16- 54
Chapter 16 - Fundamentals of Variance Analysis
16-60. (continued)
b. Fixed overhead:
Actual
Costs
Price
Variance
$313,950
Budget
$43,740 U
5,000 hours allowed = 1,000 units produced x 5 hours per unit.
16- 55
Applied
($335,340 5,750)
x 5,000a
= $291,600
$335,340
$21,390 F
a
Production
Volume
Variance
Chapter 16 - Fundamentals of Variance Analysis
16-60. (continued)
Valley Stream:
a. Direct materials:
(AP x AQ)
(SP x AQ)
Flexible Budget
(Standard Inputs
Allowed for Good
Output)
(SP x SQ)
$17.25 x 4,700
ounces
=$81,075
$16.50 x 4,700
ounces
= $77,550
$16.50 x 4 ounces
x 1,200 units
= $79,200
Actual
Costs
Price
Variance
Actual Inputs
at Standard
Price
$3,525 U
Efficiency
Variance
$1,650 F
Direct labor:
$76.50 x 7,400
hours
= $566,100
$75 x 6 hours
x 1,200 units
= $540,000
$75 x 7,400
hours
= $555,000
$11,100 U
$15,000 U
Variable overhead:
$52.50 x 6 hours
x 1,200 units
= $378,000
$52.50 x 7,400
hours
= $388,500
$378,510
$9,990 F
$10,500 U
16- 56
Chapter 16 - Fundamentals of Variance Analysis
16-60. (continued)
b. Fixed overhead:
Actual
Costs
Price
Variance
$396,000
Budget
$30,600 U
7,200 hours allowed = 1,200 units produced x 6 hours per unit.
16- 57
Applied
($397,800 7,800)
x 7,200a
= $367,200
$397,800
$1,800 F
a
Production
Volume
Variance
Chapter 16 - Fundamentals of Variance Analysis
Integrative Case
16-61. (60 min to 90 min) Performance Measurement and Variances: agm.com.
a.
The following variances can be computed to understand better why actual income fell
short of budgeted income.
Factor:
Initial income variance.........................................
($88,760 $6,800)]
Sales variances
Price variance................................................. $25)
$176,000 (8,000
Volume variance.............................................
Total sales variance..................................
81,960 U
24,000 U
0
24,000 U
Production cost variances
Price variances
Reed.......................................................... $5)
$11,520 (2,400
Handle....................................................... $4.10)
$31,200 (8,000
Labor......................................................... $12)
$65,280 (4,800
Efficiency variances
Reed.......................................................... .4)] $5
[2,400 (8,000
Labor......................................................... .5 )] $12
(4,800 (8,000
Variable overhead
Spending................................................... $1)
$5,760 (4,800
Efficiency................................................... .5)] x $1
[4,800 (8,000
Fixed overhead .............................................
Marketing variance..............................................
Total variances............................................
16- 58
480 F
1,600 F
7,680 U
5,600 U
4,000 F
9,600 U
5,600 U
960 U
800 U
1,760 U
0
45,000 U
$81,960 U
Chapter 16 - Fundamentals of Variance Analysis
16-61. (continued)
b.
The two specific items in the case that deal directly with this are the material savings and
the strike. The estimated cost of the strike can be computed as:
Lost sales............................................................
400 baskets x $12.40 (budgeted contribution margin)
Shipping...............................................................
Marketing.............................................................
Total..................................................................
$ 4,960
13,000
32,000
$49,960
We can think about including lost sales even though she sold the planned 8,000. She
might have been able to sell (and produce) more if there was no strike.
The materials savings of $8,000 (= 20% $5 8,000 units) are already incorporated in
the total material efficiency variance. There is no reason she should receive credit for
these and not be held responsible for the other efficiency losses.
c.
Certainly Mary is not responsible (in the sense of control) for the strike. However, she is
responsible for designing operations and selecting suppliers. Strikes are not unknown and
if she is not held accountable for the effect of strikes (or fires, or floods, etc.), she will not
include the possible costs in her decisions.
Should the contract be re-negotiated? This is a much more difficult question. There are (at
least) two factors that need to be considered here. First, since this is the first year of
operations, the budget against which Mary is evaluated is subject to a great deal of
uncertainty. That is, the benchmark might have been wrong. On the other hand, if the
contract is re-negotiated for this event, how effective can the budget be in the future?
16- 59

**Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.**

Below is a small sample set of documents:

Yeshiva - PSYC - 1107

well parents adjust to the temperament of a babySome parents have a better environmental fit to their babies than othersA child can become easy when the parent recognizes the needs of a childAttachmentClose emotio

Tennessee - SCM - 310

R 40. -Air Cargo: w/out this, Fred Smith (founder of FedEx) wouldn't be able to buy the equip he needed 46. -Basing system now on the potential competition that exists within the marketplace -Operating Authority Application Evaluation: Expanded numbe

East Bay High School - BUSINESS - management

purchasing from the Performance Materials Division, the Communication Technologies Division saves $14 per unit on its purchases. Bay Area Scientific, Inc.’s total income from operations would increase by $32,000: Increase in Bay Area Variable Mark

Drexel - CS - 521

Liberty - ENGL - 102

The Treasure PrincipleENGL 102-B09-200920English 102 Composition and LiteratureSpring 2009Vicki Hood #L220066179603 Joshua LaneTomball, TX 77375Outline and ThesisI.IntroductionA. Thesis1. The struggle between social status, money and family is

Indiana - BUS - 100

Class Notes 10/28Entrepreneurship Every big firms started smallo You only live twice. Once when you are born & once again when youlook into the eyes of death. 4 biggest firms in the industry control market share:o Concentrated More than 40% Small n

Indiana - BUS - 100

Class Notes 11/2/10Organization CultureGraveyards & tombstonesNot grim, not ghoulishOrganization98% die before age 50Organization cultureo If X Teaches something to or learns something from Y, and X equals Y,then that which is taught or learned is

Indiana - BUS - 100

Class Notes 11/9Office Hours: 7-9, room 640Entrepreneurial Innovationo Focus on the Entrepreneur and New Idea Two reasons why it will die Somebody is invested in the old idea Are you the only one with the ideao What makes it betterChampionship & C

UGA - AAEC - 4710

Note set 6 Chapter 7Economist article Fields of Gold: Farmers bask in soaring prices Capital marketo Assumptions The allocation of capital is efficient Max profit = r = MPK Not possible to reallocate K + improved (Proto Optimality) the generalwelfa

Indiana - BUS - 100

Tuesday 7PM-9PMChapter 5 7Chapter 6 6Chapter 10 9Class 11(will have 5 of the 7)Job rotationJob enrichmentJob enlargementTom Does one thing all day long Job enlargementMotivator or Hygiene Work itselfo Motivator Achievemento Motivator, Sec

Indiana - BUS - 100

Change and Organization Learningo A major change in modern times in the booming amount of informationColumn AColumn BKnowledgeAssetIgnoranceLiabilityo Ignorance as Asset?1. Break on Detrimental actiona. Casea.i. Moving Van Companya.i.1.Focus

Indiana - BUS - 100

Quality can hurt you if you ignore ito Costs of Quality Avoidable Scrapped materials Labor hours to repair Complaint processing Unavoidable Inspecting Sampling Quality control Pay the unavoidable, do not pay the avoidableo Total Quality Not j

Indiana - BUS - 100

Chapter 8Gelo 8 concepts fuse together3 sets of valuesA. Bias for action1. Autonomy & Entrepreneurship1.i. Intrapreneurship1.ii. Autonomy in decision making2. Bias For Action2.i. Do not sit paralyzed2.ii. Do, Fix2.ii.1.If you dont know anythin

Indiana - BUS - 100

Supply Chain Softwareo The Oxygen for businesso Made $17 billion in rental feeso ENSURE THAT SUPPLY MEETS DEMAND Balanceo Track & predict customer demando Adjust the flow of goodsImplementation strategic changeRising & falling demandFour best pr

Indiana - BUS - 100

What we wanto Efficiency DTR Doing Things Righto Efficiency DRT Doing Right Things Right road Right strategy Waswanippi Creeo Northern Ontario, Canada Protein Source Could not farm b/c weather Capture meat for two months because sources are

Indiana - E - 202

Chapter 13 OutlineTransmission Mechanisms Economic forces that can amplify shocks bytransmitting them across time and sectors of the economy.o A negative shock reduces output directly.o A series of indirect negative effects can amplify shocks and spr

Indiana - E - 202

Chapter 16: The Federal Budget Taxesand SpendingDuring lecture, I will only cover the importanttrends in the current budget. However, you areresponsible for the full reading of the chapterand to have a general idea of various majortax and spending p

Indiana - E - 202

Chapter 10: Unemployment and Labor ForceParticipationEmployment and UnemploymentAfter this discussion you should be able to: Define and calculate the unemployment rate, the labor forceparticipation rate, and employment-population rate. Identify the

Indiana - E - 202

Chapter 15 NotesKey Terms: Sticky Wageso Wages resistant to change Nominal Wageso The average wage not adjusted for changes in prices of consumer goods. Money Demand Curveo How much Money willingly held at each interest rateo Influences: Interest

Indiana - E - 202

Chapter 17 OutlineFiscal Policy Change in Federal taxes & purchase that are intended to achieveMacroeconomic objectiveso High employment, Price stability, High rates of growtho Case for FP is strongest when the economy is in a recession because ofag

Indiana - E - 202

Chapter 19: International FinanceTrade Deficito Imports > ExportsTrade Surpluso Import < ExportsBalance of Paymentso Yearly summary of all the economic transactions between residents of onecountry and residents of the rest of the worldo ALWAYS = 0

Alexandria Technical College - UKY - 10

UNIVERSIDAD TECNOLGICA DEQUERTAROLISTA DE COTEJOASIGNATURA:Martn Avilez MartnezHerramientas InformticasACTIVIDAD :PERIODO: SEP-DIC'12No.EVALUACIN: 3REACTIVOSNo.NOMBRE DEL ALUMNOEQPrcticas de Excel12345678910121314151617AGUILA

Alexandria Technical College - UKY - 10

voluntad-conocimiento-servicioProcesos IndustrialesGrupo:PI 17Asignatura:Herramientas de la informticaProfesor:Ing. Martn Avilez MartnezTrabajo de investigacin:Curriculum vitaeAlumno:Hugo Enrique Hernndez AboytesCurriculum VitaeDatos Acadmico

Alexandria Technical College - UKY - 10

voluntad-conocimiento-servicioProcesos IndustrialesGrupo:17-IPAsignatura:Herramientas de la informticaProfesor:Ing. Martn Avilez MartnezTrabajo de investigacin:Curriculum vitaeAlumno:Pedro Fernando Prez RojasCurriculum VitaeDatosAcadmicosEsc

Alexandria Technical College - UKY - 10

SOLUCIONES ABOYTESREPORTE DE PRODUCCIONTRIMESTRE 1LINEA DE PRODUCCION DE SOFTWARECUOTA DE GASTOSCLAVE DE PARTE ENEROFEBRERO MARZOTOTAL TRIMESTRE COSTO UNITARIO COSTO TOTAL GASTOSK-15265847895902323502K-15659877623896622576K-69862237413

Alexandria Technical College - UKY - 10

EmpresaOrganizacin industrialPI-1727 de Noviembre del2012S.AdeR.L.FiguraJurdicaS.A.deR.L. (Sociedad Annima deResponsabilidadLimitada)Caractersticas.Mnimo2sociosEs una combinacin de recursos con un fincomnEsdecarctereconmicoycomercialVentajas

Alexandria Technical College - UKY - 10

Universidad Tecnolgica de QuertaroVoluntad Conocimiento ServicioProcesos industrialesERP (Enterprice Resource Planning)Grupo:PI-17Asignatura:Herramientas InformticasNombre:Gonzlez Rodrguez Karen Fernanda.Hernndez Aboytes Hugo Enrique.Loredo Gar

Alexandria Technical College - UKY - 10

ERC (Planeacin de Recursos Empresariales)INTRODUCCIONERP son las siglas de entreprise resource planning o planeacin de recursos de la empresa;sus orgenes se remontan a la Segunda Guerra Mundial. El gobierno estadounidense empleoprogramas especializado

Alexandria Technical College - UKY - 10

TABLA DE CONTENIDOTABLA DE CONTENIDO. 2MANUFACTURA ESBELTA: PROPUESTAS DE MEJORA AL PROCESO PRODUCTIVO DE UNAEMPRESA DEDICADA A LA ELABORACION Y COMERCIALIZACIN DE FRITURAS. 3RESUMEN. 3DESARROLLO. 3ANTECEDENTES. 41. DEFINIR ESPECIFICACIONES DEL PRO

Alexandria Technical College - UKY - 10

MISION:Lleva a nuestros socios el conocimiento einnovacin local y la capacidad de hacercrecer el valor a travs de nuestra redinternacional, proporcionar un ambientede trabajo que fomente el trabajo enequipo, motive a nuestros empleados aque produzc

Alexandria Technical College - UKY - 10

ERC (Planeacion de Recursos Empresariales)INTRODUCCIONERP son las siglas de entreprise resource planning o planeacin de recursos de la empresa;sus orgenes se remontan a la Segunda Guerra Mundial. El gobierno estadounidense empleoprogramas especializad

Alexandria Technical College - UKY - 10

CUESTIONARIO1.- Para que son usadas las lainas?Las lainas son utilizadas para medir pequeas aberturas o ranuras. Estos medidoresconsisten en laminas delgadas que tienen marcado su espesor.2.- Cules son los rangos de espesores de las lainas?Existen ju

Alexandria Technical College - UKY - 10

CUESTIONARIO1.- Cules son las precauciones que se deben tomar en cuenta cuando medimos conmedidores de altura?Seleccionar el medidor de altura que mejor se ajuste a lo que vamos a medirNo aplicar fuerza excesiva al medidor de alturaUtilizar guantes p

Alexandria Technical College - UKY - 10

Universidad Tecnolgica de QuertaroVoluntad Conocimiento ServicioCaso Southwestern UniversityGrupo:PI-17Asignatura:Administracin de la produccinNombre:Fernando Prez Rojas.Hernndez Aboytes Hugo Enrique.Jess Manuel Dorantes Balderas.Jos Dolores Va

Alexandria Technical College - UKY - 10

No habr posadas en la carrera deprocesos industriales?A pesar de la crisis y las complicaciones econmicas se puede descartar lapoltica que no va haber posadas, hemos experimentado en los ltimosaos, segn docentes de la institucin no se hacen posadas. D

Alexandria Technical College - UKY - 10

Equipo 1Organizacin Industrial20 de Noviembre del 2012Evaluacin por ObjetivosProcesos IndustrialesPI-17ObjetivoEsla meta o nivel que sedebe alcanzar en unperiododetiempodeterminado.Evaluacion por objetivos Tambinconocido como AXO oadminis

Alexandria Technical College - UKY - 10

Alexandria Technical College - UKY - 10

Inaugura UTEQ Congreso Internacional de Mantenimiento IndustrialDepartamento de Prensa y DifusinDireccin de Difusin y Extensin UniversitariaQuertaro, Qro. A 24 de octubre de 2012Boletn Informativo BI170/2012Contribuyendo al fomento de una cultura cie

Alexandria Technical College - UKY - 10

voluntad-conocimiento-servicioProcesos IndustrialesGrupo:PI 17Asignatura:Propiedad de los materialesProfesor:Gerardo VergaraTrabajo de investigacin:Ensayo Una ojeada a la materiaAlumno:Hugo Enrique Hernndez AboytesCurriculum VitaeDatos Acadmi

Alexandria Technical College - UKY - 10

SE CUMPLIERON LOS OBJETIVOS DEL TALLER DE LEANMANUFACTORING.Esta persona es maestra de la Universidad Tecnolgica de Quertaro la cualasisti al Congreso e imparti el taller de Lean Manufactoring el da 29 deNoviembre, donde participaron alumnos de esta U

Emporia - ECON - 101

THE JOURNAL OF FINANCE VOL. LXV, NO. 2 APRIL 2010Personal Bankruptcy and CreditMarket CompetitionASTRID A. DICK and ANDREAS LEHNERTABSTRACTWe document a link between U.S. credit supply and rising personal bankruptcy rates.We exploit the exogenous va

Emporia - ECON - 101

The Challenge of Resolving FutureClaims in BankruptcyMICHAEL DISTEFANOIt is common knowledge that the Bankruptcy Code provides adebtor with a fresh start by allowing it to discharge pre-petitionclaims. Similarly, Section 363 of the Bankruptcy Code al

Brown - INTL - 1350

IR Theory 11/09Globalization------buzzword of the 1990sa great defining feature of the post-Cold War worldflows of goods, people, capital, informationinterconnectedness, interdependenceno single definition of globalization, but 4 overlapping e

Montgomery - BA - 101

Carlos GarciaBA101FrazierBook reportBook Report PresentationGood to Great: Why Some Companies Make the Leap.and others dont byJim Collins was originally published in 2001. The book identifies and evaluates thefactors and variables that allow a smal

Montgomery - BA - 101

By Carlos GarciaInternational BusinessProject- El SalvadorBa 101 FrazierBackground Independence Date Civil War Currency Third largest economy in Central AmericaEl SalvadorBusiness ClimateThe coffee industry isdefinitely the majorbusiness stre

Montgomery - BA - 101

C&ADrycleaners5335WisconsinAvenueNorthwest,Washington,DC20015Owners:AmitojSinghCarlosGarciaExecutivesummaryC&ADrycleanersoffersthemostaffordablewaytoacquireprofessionaldrycleaningservices.Thecompanyspecializesindrycleaning,laundry,leatherandsued

Montgomery - BA - 101

Income Statementfor November 2012RevenueSales/Revenues$72,000Total Revenue$72,000Cost of Goods SoldStarting Inventory$3,000Less Ending Inventory$3,000Cost of Goods Sold$4,000Gross Profit$68,000Operating ExpensesRent$10,000Wages Expenses

Liberty - ACCT - 521

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1834-7649.htmThe design and implementationof activity-based costingActivity-basedcostingA case study of a Taiwanese textile companyRong-Ruey DuhDepartmen

Liberty - ACCT - 521

International Journal of Accounting and Financial ReportingISSN 2162-30822011, Vol. 1, No. 1Decisions Based on Synthesis Documents Informationof the ABC (Activity-Based Costing) MethodGary CokinsSAS Institute Inc.,Cary, North Carolina, USATel: 248

Liberty - ACCT - 521

LE HESAPLANAN MALYETLER LE MEVCUTMALYETLERN KARILATIRILMASI: MERMERLETMES RNEProf. Dr. Durmu ACAR*Yrd. Do. Dr. Hseyin DALAR*Yrd. Do. Dr. Osman AKIN*ZKreselleme ve teknolojinin gelimesine paralel ortaya kan ulusal veuluslar aras rekabette ne kan re

Liberty - ACCT - 521

YNTEM LE MTER KARLILIK ANALZ:SEYAHAT ACENTASI RNEK OLAYI*Dr. Veli Erdin REN*Prof. Dr. Nilfer TETK*ZHzla artan kresel rekabet ortamnda stnlk salamak isteyen iletmeler, sadece rn karlln deil mterilerin de karlln bilmek zorundadrlar. Mterilerin iletme k

Liberty - ACCT - 521

Energies 2013, 6, 425-443; doi:10.3390/en6010425OPEN ACCESSenergiesISSN 1996-1073www.mdpi.com/journal/energiesArticleDecisions on Energy Demand Response Option Contracts inSmart Grids Based on Activity-Based Costing andStochastic ProgrammingSeog-

Liberty - ACCT - 521

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATIONActions Are Being Taken to Address theImpact That International FinancialReporting Standards Will Have on TaxAdministrationSeptember 8, 2010Reference Number: 2010-30-112This report has cleared the Tr

Liberty - ACCT - 521

The Activity-Based Costing Method:Development and ApplicationsGregory Wegmann*This paper analyzes the management accounting applications, which try to improvethe Activity-Based Costing (ABC) method. First, the paper describes them using theStrategic

Liberty - ACCT - 521

I.Understanding the Roles of Offer and Acceptance in the Formation of a Contract*What is an Acceptance? An acceptance is "a manifestation of assent to the terms [of the offer] made by the offeree in the manner invited or required by the offer." In deter

Liberty - ACCT - 521

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1176-6093.htmQRAM8,2The diffusion ofactivity-based costing inJordanian industrial companies180Mahmoud NassarApplied Science Private University, Amman, J

Liberty - ACCT - 531

71Journal of Expert Systems (JES)Vol. 1, No. 3, 2012Copyright World Science Publisher, United Stateswww.worldsciencepublisher.orgRelevance and Applicability of Activity Based Costing: AnAppraisalSarbapriya RayShyampur Siddheswari Mahavidyalaya Col

Liberty - ACCT - 531

University of UtahModern Congressional Election Theory Meets the 1992 House ElectionsAuthor(s): Sunil Ahuja, Staci L. Beavers, Cynthia Berreau, Anthony Dodson, Patrick Hourigan,Steven Showalter, Jeff Walz and John R. HibbingReviewed work(s):Source: P

Liberty - ACCT - 531

Liberty - ACCT - 531

Are university researchers at risk for patentinfringement?Amy Yancey & C Neal Stewart, JrAcademic researchers have regularly ignored patents on key technologies as a strategy to maneuver around patentthickets and freedom-to-operate issues, but they ma

Liberty - ACCT - 531

Dr. Emre Cengiz1*Prof. Dr. Ayten Ersoy2*ZETFaaliyet Tabanl Maliyetleme (FTM), faaliyetler, kaynaklarve maliyet objelerinin (rnler ve servisler gibi) maliyet veperformans lm iin bir toplam kalite ynetim aracdr.Yneticiler, FTM tarafndan elde edilen ma