8-24
8-36
(20 min.)
Activity-based costing, batch-level variance analysis
1.
Static budget number of crates = Budgeted pairs shipped / Budgeted pairs per crate
= 240,000/12
=
20,000 crates
2.
Flexible budget number of crates = Actual pairs shipped / Budgeted pairs per crate
=
180,000/12
=
15,000 crates
3.
Actual number of crates shipped = Actual pairs shipped / Actual pairs per box
= 180,000/10
= 18,000 crates
4.
Static budget number of hours = Static budget number of crates
×
budgeted hours per box
= 20,000
×
1.2 = 24,000 hours
Fixed overhead rate = Static budget fixed overhead / static budget number of hours
= 60,000/24,000
=
$2.50 per hour
5.
Variable Overhead Variance Analysis for Rica’s Fleet Feet Inc. for 2008
Actual
Actual hours
Budgeted hours allowed for
Variable Overhead
x Budgeted rate
Actual output x Budgeted rate
(18,000 × 1.1 × $21)
(18,000 × 1.1 × $20)
(15,000 × 1.2 × $20)
$415,800
$396,000
$360,000
$19,800 U
$36,000 U
Spending variance
Efficiency variance
6.
Fixed Overhead Variance Analysis for Rica’s Fleet Feet Inc. for 2008
Actual
Static Budget
Budgeted hours allowed for
Fixed Overhead
Fixed Overhead
Actual output × Budgeted Rate
(15,000 × 1.2 ×$2.5)
$55,000
$60,000
$45,000
$5,000 F
$15,000 U
Spending variance
Production volume variance

8-38
(35 min.)
Production-Volume Variance Analysis and Sales Volume Variance.
1. and 2.
Fixed Overhead Variance Analysis for Dawn Floral Creations, Inc. for February
Actual
Fixed
Static Budget
Standard Hours
Overhead
Fixed Overhead
× Budgeted Rate
(600 × 1.5 × $6*)
$9,200
$9,000
$5,400
$200 U
$3,600 U
Spending variance
Production-volume variance
* fixed overhead rate
= (budgeted fixed overhead)/(budgeted DL hours at capacity)
= $9,000/(1000 x 1.5 hours)
= $9,000/1,500 hours
= $6/hour
3.
An unfavorable production-volume variance measures the cost of unused capacity. Production
at capacity would result in a production-volume variance of 0 since the fixed overhead rate is
based upon expected hours at capacity production.
However, the existence of an unfavorable
volume variance does not necessarily imply that management is doing a poor job or incurring
unnecessary costs.
Using the suggestions in the problem, two reasons can be identified.

8-25