Chap015.xlsx - Questions 15-1 through 15-13 Brief Exercises 15-14 through 15-23 15-14 Sipple Furniture's master budget for the year includes $360,000

Chap015.xlsx - Questions 15-1 through 15-13 Brief Exercises...

This preview shows page 1 out of 165 pages.

You've reached the end of your free preview.

Want to read all 165 pages?

Unformatted text preview: Questions 15-1 through 15-13 Brief Exercises 15-14 through 15-23 15-14 Sipple Furniture's master budget for the year includes $360,000 for fixed supervis capacity, which is used to set the fixed overhead allocation rate, is 500 units per month. expected to be incurred uniformly throughout the year. During August the company prod production supervisory salaries of $29,000, and reported underapplied fixed overhead o salaries. What is Sipple Furniture's supervisory salaries flexible budget variance for Aug 15-14 The budgeted supervisory salary per month is: $360,000 ÷ 12 months/year = $30,000 per month Thus, the flexible-budget variance for production supervisory salaries in August is $29,000 − $30,000 = $1,000 favorable 15-15 Baxter Corporation's master budget calls for the production of 5,000 units per mo labor costs for the year. Baxter considers indirect labot as a component of variable overh company produced 4,500 units and incurred indirect labor costs of $10,100. What amou April as a flexible-budget variance for indirect labor? 15-15 The standard indirect labor cost per unit is: $144,000/year ÷ (5,000 units/month × 12 months/year) = $2.40 per unit Total actual indirect labor cost, April $10,100 Total standard indirect labor cost for the 4,500 units manufactured in April: 4,500 units × $2.40/unit $10,800 Indirect labor flexible budget variance $ 700 F 15-16 Patel and Sons, Inc., uses a standard cost system to apply factory overhead cos Practical capacity for the plant is defined as 50,000 machine hours per year, which repre output. Annual budgeted fixed overheadcosts are $250,000, and the budgeted variable unit. Factory overhead costs are applied on the basis of standard machine hours allowe Budgeted and actual output for the year was 20,000 units, which took 41,000 machine h overhead costs for the year amounted to $245,000, while the actual variable overhead c What was (a) the fixed overhead spending variance for the year, and (b) the overhead p for the year? output. Annual budgeted fixed overheadcosts are $250,000, and the budgeted variable unit. Factory overhead costs are applied on the basis of standard machine hours allowe Budgeted and actual output for the year was 20,000 units, which took 41,000 machine h overhead costs for the year amounted to $245,000, while the actual variable overhead c What was (a) the fixed overhead spending variance for the year, and (b) the overhead p for the year? 15-16 Fixed overhead variances for the year: (a) Spending variance = Actual fixed overhead costs − Budgeted fixed overhea = $245,000 − $250,000 = $5,000 F (b) Production volume variance = Budgeted fixed overhead − Applied fixed ove = $250,000 − (20,000 units × 2 hrs./unit × $5/h = $250,000 − $200,000 = $50,000 U 15-17 Refer to the data in 15-16 above. Given this information, what was the (a) variable variance for the year, and (b) the variable overhead efficiency variance for the year? 15-17 Variable overhead variances for the year: (a) Spending variance = Actual variable overhead costs − Flexible budget bas = ($3.90/unit × 20,000 units) − (41,000 hours × $2.00/h = $78,000 − $82,000 = $4,000 F or, = AQ × (AP − SP) = 41,000 hrs. × ($1.90244 − $2.00)/hr. = $4,000 F (rounded) (b) Efficiency variance = Flexible budget based on Inputs − Flexible budget ba = $82,000 − (20,000 units × 2 hrs./unit × $2.00/hr.) = $82,000 − $80,000 = $2,000 U or, = SP × (AQ − SQ) = $2.00/hr. × (41,000 − 40,000) hrs. = $2,000 U 15-18 Refer to the data in 15-16 above. Provide the correct summary journal entries for overhead costs (both variable and fixed) for the year. Assume that the company uses a s Overhead, to record both actual and applied overhead. Also, assume that the only variab electricity and that the actual fixed overhead consisted of depreciation of $150,000 and s $95,000. 15-18 Refer to the data in 15-16 above. Provide the correct summary journal entries for overhead costs (both variable and fixed) for the year. Assume that the company uses a s Overhead, to record both actual and applied overhead. Also, assume that the only variab electricity and that the actual fixed overhead consisted of depreciation of $150,000 and s $95,000. 15-18 Summary journal entries for the year: Actual Overhead Costs Dr. Factory Overhead $323,000 Cr. Accumulated Depreciation--Factory Cr. Salaries Payable $ 95,000 Cr. Utilities Payable $ 78,000 $150,000 Overhead Costs Applied to Production Dr. WIP Inventory (20,000 units × 2 hrs. × $7.00/hr.) $280,000 Cr. Factory Overhead $280,000 15-19 Refer to your answer to 15-16 and 15-17 above and the journal entries made in c Given this information, provide the appropriate journal entry to (a) record the overhead v (thereby closing out the balance in the Factory Overhead account) and (b) close the vari Goods Sold (CSG) at the end of the period. 15-19 Summary journal entries for the year: To Record Factory Overhead Variances Dr. Production Volume Variance $50,000 Dr. Variable Overhead Efficiency Variance $ 2,000 Cr. Variable Overhead Spending Variance $ 4,00 Cr. Fixed Overhead Spending Variance $ 5,000 Cr. Factory Overhead $43,000 To Close the Net Overhead Variance to CGS at Year-End Dr. CGS $43,000 Dr. Variable Overhead Spending Variance $ 4,000 Dr. Fixed Overhead Spending Variance $ 5,000 Cr. Production Volume Variance $50,000 Cr. Variable Overhead Efficiency Variance $ 2,000 15-20 As an extension to 15-19, assume that at the end of the year management of Pa that the overhead variances should be allocated to WIP inventory, Finished Goods Inve following percentages: 10%, 20%, and 70%, respectively. Provide the proper journal en manufacturing overhead variances for the year. 15-20 As an extension to 15-19, assume that at the end of the year management of Pa that the overhead variances should be allocated to WIP inventory, Finished Goods Inve following percentages: 10%, 20%, and 70%, respectively. Provide the proper journal en manufacturing overhead variances for the year. 15-20 To Allocate the Net Factory Overhead Variance at Year-End Dr. WIP Inventory (10% of $43,000) $ 4,300 Dr. Finished Goods Inventory (20% of $43,000) $ 8,600 Dr. CGS (70% × $43,000) $30,100 Dr. Variable Overhead Spending Variance $ 4,000 Dr. Fixed Overhead Spending Variance $ 5,000 Cr. Production Volume Variance $50,000 Cr. Variable Overhead Efficiency Variance $ 2,00 15-21 Refer to the information in 15-16 above. Calculate and label the following factory the year: (a) total overhead variance, (b) total flexible-budget variance, and (c) fixed ove variance. 15-21 Factory Overhead Variance: Two-Variance Analysis (Breakdown) (a) Total Overhead Variance = actual overhead − overhead applied to production = $323,000 − (20,000 units × 2 hrs./unit × $7.00/hr.) = $323,000 − $280,000 = $43,000U (b) Total Flexible-Budge overhead − Flexible Budget for Output = $323,000 − [($2 20,000 units) + $250,000] = $323,000 − $33 or, = Variable overhead flexible-budget varia flexible-budget variance = [$78,000 − (20,000 × $2 × 2)] + [$245, = $2,000F + $5,000F = $7,000F (c) Fixed overhead production Volume variance = budgeted fixed overhea overhead = $250,000 − (20,000 units × 2 hrs./unit × $5.00/hr.) = $250,000 − $200,000 = $50,000U (i.e., fixed overhead was underapplied by $50,000 during the ye = [$78,000 − (20,000 × $2 × 2)] + [$245, = $2,000F + $5,000F = $7,000F (c) Fixed overhead production Volume variance = budgeted fixed overhea overhead 15-22 Refer to the variances you −calculated in conjunction with 15-21 and to the informa = $250,000 (20,000 units × 2 hrs./unit × $5.00/hr.) above. Give the appropriate journal entries to record: (a) actual overhead costs for the y = $250,000 − $200,000 costs for the= year (both variable and fixed), and the three manufacturing cost varianc $50,000U (i.e., fixed overhead was(b) underapplied by $50,000 during the ye 15-22 Summary Journal Entries (a) Acutal Overhead Costs Dr. Factory (or, Manufacturing) Overhead 323,000 Cr. Accumulated Depreciation--Factory 150,000 Cr. Salaries Payable 95,000 Cr. Utilities Payable 78,000 (b) Overhead Costs Applied to Production Dr. WIP Inventory (20,000 units × 2 hrs. × $7/hr.) 280,000 Cr. Factory (or, Manufacturing) Overhead 280,000 (c) To Record Variances Using a Two-Variance Approach Dr. Fixed Overhead Production Volume Variance 50,000 Cr.Total Flexible-Budget Variance 7,000 Cr. Factory (or, Manufacturing) Overhead 43,000 15-23 Refer to the journal entries made in 15-22. Provide an appropriate end-of-year clo overhead cost variance is: (a) closed entirely to Cost of Goods Sold (CGS), and (b) alloc Inventory, Finished Goods Inventory, and CGS using the following percentages: 10%, 20 15-23 End-of-Year Journal Entries (a) Net Variance Closed to CGS: Dr. CGS $43,000 Dr. Total Flexible-Budget Variance Cr. Production Volume Variance $ 7,000 $50,000 (b) Net Variance Allocated to Ending Inventories and CGS: Dr. WIP Inventory (10% × $43,000) $ 4,300 Dr. Finished Goods Inventory (20% × $43,000) $ 8,600 Dr. CGS (70% × $43,000) $30,100 Dr. CGS $43,000 Dr. Total Flexible-Budget Variance Cr. Production Volume Variance $ 7,000 $50,000 (b) Net Variance Allocated to Ending Inventories and CGS: Dr. WIP Inventory (10% × $43,000) $ 4,300 Dr. Finished Goods Inventory (20% × $43,000) $ 8,600 Dr. CGS (70% × $43,000) $30,100 Dr. Total Flexible-Budget Variance $ 7,000 Cr. Production Volume Variance $50,000 000 for fixed supervisory salaries. Practical 500 units per month. Supervisory salaries are ust the company produced 250 units, incurred lied fixed overhead of $14,000 for supervisory dget variance for August? y salaries in August is: of 5,000 units per month and $144,000 indirect nent of variable overhead cost. During April the $10,100. What amount would be reported for .40 per unit 0,800 factory overhead costs to units produced. per year, which represents 25,000 units of he budgeted variable overhead cost is $4.00 per machine hours allowed for the units produced. ook 41,000 machine hours. Actual fixed al variable overhead cost per unit was $3.90. nd (b) the overhead production volume variance he budgeted variable overhead cost is $4.00 per machine hours allowed for the units produced. ook 41,000 machine hours. Actual fixed al variable overhead cost per unit was $3.90. nd (b) the overhead production volume variance dgeted fixed overhead d − Applied fixed overhead ts × 2 hrs./unit × $5/hr.) $50,000 U at was the (a) variable overhead spending nce for the year? − Flexible budget based on inputs ,000 hours × $2.00/hr.) − Flexible budget based on Output /unit × $2.00/hr.) s. ary journal entries for actual and applied the company uses a single account, Factory me that the only variable overhead cost was ion of $150,000 and supervisory salaries of ary journal entries for actual and applied the company uses a single account, Factory me that the only variable overhead cost was ion of $150,000 and supervisory salaries of 95,000 0 $150,000 .) $280,000 ,000 rnal entries made in conjunction with 15-18. ecord the overhead variances for the period and (b) close the variance accounts to Cost of 00 $ 2,000 $43,000 $ 4,000 $ 5,000 d $ 4,000 $ 5,000 $50,000 $ 2,000 ar management of Patel and Sons, Inc., decides Finished Goods Inventory, and CGS using the the proper journal entry to close out the ar management of Patel and Sons, Inc., decides Finished Goods Inventory, and CGS using the the proper journal entry to close out the nd 00 $ 8,600 4,000 $ 5,000 $50,000 $ 2,000 the following factory overhead variances for nce, and (c) fixed overhead production volume akdown) pplied to production hrs./unit × $7.00/hr.) 00 Total Flexible-Budget Variance = Actual − Flexible Budget for Overhead based on = $323,000 − [($2/hr. × 2hrs./unit × nits) + $250,000] = $323,000 − $330,000 = $7,000F d flexible-budget variance + fixed overhead 00 × $2 × 2)] + [$245,000 − $250,000] udgeted fixed overhead − applied fixed 00/hr.) $50,000 during the year) 00 × $2 × 2)] + [$245,000 − $250,000] udgeted fixed overhead − applied fixed -21 and to the information in 15-16 and 15-18 00/hr.) erhead costs for the year and applied overhead facturingduring cost variances $50,000 the year) calculated in 15-21. priate end-of-year closing entry if the net (CGS), and (b) allocated among WIP percentages: 10%, 20%, and 70%, respectively. 7,000 $50,000 and CGS: 4,300 00) $ 8,600 100 7,000 $50,000 and CGS: 4,300 00) $ 8,600 100 7,000 $50,000 Electricity Indirect materials: Indirect labor (maintenance) Production-related supplies Total variable overhead Budgeted Fixed Overhead/Month: Engineering support Factory insurance Properaty taxes (factory) Equipment depreciation Indirect labor: Supervisory salaries Set-up labor Materials handling Total fixed overhead/month Total manufacturing overhead/month $32,000 $40,000 $48,000 $4,000 $16,000 $24,000 $8,000 $84,000 $5,000 $20,000 $30,000 $10,000 $105,000 $6,000 $24,000 $36,000 $12,000 $126,000 $15,000 $5,000 $12,000 $13,800 $15,000 $5,000 $12,000 $13,800 $15,000 $5,000 $12,000 $13,800 $14,800 $2,400 $2,500 $65,500 $149,500 $14,800 $2,400 $2,500 $65,500 $170,500 $14,800 $2,400 $2,500 $65,500 $191,500 (2) Cost function, within the relevant range, for montly factory overhead cost: Let X = monthly machine hours Let Y = montly factory overhead cost Let a = estimated fixed overhead cost per month = Let b = estimated variable overhead cost/MH = $65,500 $21.00 Then, monthly overhead cost function is: Y = $65,500 + ($21.00 * X) For example: X 3,000 3,500 4,000 4,500 5,000 5,500 6,000 Y $128,500 $139,000 $149,500 $160,000 $170,500 $181,000 $191,500 (3) Graphical representation of monthly factory overhead cost: Plot of Monthly Factory Overhead Cost as a Function of Machine Hours $250,000 $200,000 $150,000 $100,000 $50,000 $0 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 Machine Hours (MH) per Month Actual MH worked during the month = 5,600 Requirements 1. Calculate the (a) flexible-budget variance and (b) the production volume variance for the month. (Hint: the total overhead variance for the month is $16,660U.) 2. Provide summary journal entries to record actual overhead costs and standard overhead cost applied to production during the month. 3. Provide the journal entry to record the two overhead variances for the month. 4. Assume that the variances calculated above represent net variances for the year. Give the required journal entry to close these variances to the Cost of Goods Sold (CGS) account. Solution (1) Two-way breakdown of total overhead variance for the month: Standard overhead application rates/MH: Fixed Overhead: Budgeted fixed overhead Denominator level Variable Overhead Total Overhead $65,500 6,550 Total overhead variance for the month: Actual Overhead Cost: Variable Fixed Standard Overhead Applied: Standard allowed MH Variable Ovhead rate/MH Total overhead variance for the month Two-Way Breakdown of Total Overhead Variance: Flexible-Budget (Controllable) Variance: Actual Overhead Cost Incurred FB for Overhead based on Output: Budgeted Fixed OVH Budgeted Variable OVH: Variable OVH rate: $21.00 Std. Allowed MH 5,500 Flexible-Budget (Controllable) Variance Fixed Overhead Production Volume Variance: Denominator Activity Level 6,550 Std. Allowed MH for month 5,500 Standard fixed OVH rate per MH $10.00 $21.00 $31.00 $120,960 $66,200 $187,160 5,500 $31.00 $170,500 $16,660 Unfavorable $187,160 $65,500 $115,500 $181,000 $6,160 Unfavorable 1,050 $10.00 $10,500 Unfavorable (2) Summary Journal Entries to Record Overhead Costs for December: To record actual variable overhead costs: Debit Credit Credit Credit Credit Credit Factory Overhead Utilities Payable (electric) Indirect Materials Inventory: A Indirect Materials Inventory: B Accrued Maintenance Labor Manufacturing Supplies Inventory $120,960 $47,600 $5,600 $22,400 $33,600 $11,760 To record actual fixed overhead costs: Debit Credit Credit Credit Credit Credit Credit Credit Factory Overhead Salaries Payable--Engineering Support Insurance Payable (or, Prepaid Insurance) Property Taxes Payable Equipment Depreciation (Factory) Salaries Payable--Supervisory Labor Wages Payable--Set-up Labor Wages Payable--Materials-handling Labor $66,200 $15,500 $5,500 $12,000 $13,800 $14,800 $2,200 $2,400 To apply standard variable overhead costs to production: Debit Credit WIP Inventory Factory Overhead $115,500 $115,500 To apply standard fixed overhead costs to production: Debit Credit WIP Invetory Factory Overhead $55,000 $55,000 (3) To Record Overhead Variances for the Month: To record overhead variances and close the Factory Overhead Account: Debit Debit Credit Controllable Overhead Variance Fixed Overhead Production Volume Variance Factory Overhead $6,160 $10,500 $16,660 (4) Assuming end of year: Closing of Total Overhead Variance to CGS: Debit Credit Credit CGS Controllable Overhead Variance Fixed Overhead Production Volume Variance $16,660 $6,160 $10,500 Ex. 15-26: Graphical Analysis--Variable Overhead Variances Background You are in charge of making a presentation to operating managers regarding the meanin overhead variance that appears each month on their performance reports. The controller graphical presentation might be an effective way to communicate the essential points to such, she provided you with the following partially completed graph. This graph represen (1) machine hours are used to apply variable overhead costs to products, and (2) there is variable overhead spending variance and an unfavorable variable overhead efficiency va also indicate that she would like you to use the following notation for some of the items to chart: actual number of machine hours worked during the period = AQ; standard number allowed for the output of the period = SQ; actual variable overhead cost per machine hou period = AP; and, standard variable overhead cost per machine hour = SP. (A) (C) (D) Area (G) Area (I) Area (H) (B) (E) (F) Required Based on the preceding assumptions and information, properly label the components Solution (A) = Variable Overhead Costs per Machine Hour (label) (B) = Machine Hours (i.e., the activity measure used to apply variable overhea (C) = Actual variable overhead cost per machine hour = AP (D) = Standard variable overhead cost per machine hour = SP (E) = Standard machine hours allowed (in total) for output achieved = SQ (F) = Actual machine hours worked (in total) for output achieved = AQ (G) = Variable overhead spending variance = AQ × (AP – SP) (H) = Standard variable overhead cost applied to production = Flexible overhead based on units produced (i.e., based on standard allowed machine (I) = Variable Overhead Efficiency Variance = SP × (AQ – SQ) Sum of areas (G), (H), and (I) = actual variable overhead cost for the period = s s regarding the meaning of the total reports. The controller suggested that a the essential points to your audience. As h. This graph represents a situation where oducts, and (2) there is both an unfavorable overhead efficiency variance. The controller or some of the items to be included in your = AQ; standard number of machine hours d cost per machine hour worked during the our = SP. Area (I) (B) label the components of the above graph. apply variable overhead costs) (label) SP hieved = SQ ved = AQ P) production = Flexible budget for variable dard allowed machine hours) = SQ × SP Q) ad cost for the period = AP × AQ Ex. 15-27: Graphical Analysis—Fixed Overhead Variances (Continuance of 15Background The controller is satisfied with the graphical representation you prepared in conjunction with Exercise 15 26. She thinks that this graphical representation of variable overhead standard cost variances will be we received by operating managers of the company. As such, the controller asks you to prepare an accompanying graph regarding fixed overhead standard cost variances. She indicates that, in contstructing your graph, you should assume the following: (1) fixed overhead is applied to production o the basis of standard machine hours allowed for the output of th...
View Full Document

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes