A 16000 082 13120 b60800 025 089 13528 c 60000 025

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a 16,000 × $0.82 = $13,120b60,800 × 0.25 × $0.89 = $13,528c60,000 × 0.25 × $0.89 = $13,3502.Actual Costs Incurred(Actual Input Qty.× Actual Price)Actual Input Qty.× Budgeted PriceFlexible Budget(Budgeted Input Qty. Allowed for Actual Output × Budgeted Price)$13,120a$14,240b$13,528c$1,120 F$712 UPrice varianceEfficiency variance$408 FFlexible-budget variancea 16,000 × $0.82 = $13,120b16,000 × $0.89 = $14,240c 60,800 × 0.25 × $0.89 = $13,5283.The favorable flexible-budget variance of $408 has two offsetting components:(a) favorable price variance of $1,120––reflects the $0.82 actual purchase cost being lower than the $0.89 budgeted purchase cost per pound.(b) unfavorable efficiency variance of $712––reflects the actual materials yield of 3.80 scones per pound of pumpkin (60,800 ÷ 16,000 = 3.80) being less than the budgeted yield of 4.00 (60,000 ÷ 15,000 = 4.00). The company used more pumpkins (materials) to make the scones than was budgeted.One explanation may be that Peterson purchased lower quality pumpkins at a lower cost per pound.7-9
7-22(15 min.) Materials and manufacturing labor variances.Actual CostsIncurred(Actual Input Qty.× Actual Price)Actual Input Qty.× Budgeted PriceFlexible Budget(Budgeted InputQty. Allowed for Actual Output × Budgeted Price)DirectMaterials$200,000$214,000$225,000$14,000 F$11,000 FPrice varianceEfficiency variance$25,000 FFlexible-budget varianceDirect $90,000$86,000$80,000Mfg. Labor$4,000 U$6,000 UPrice varianceEfficiency variance$10,000 UFlexible-budget variance7-23 (30 min.) Direct materials and direct manufacturing labor variances.1.May 2009Actual ResultsPrice VarianceActual Quantity ×Budgeted PriceEfficiency VarianceFlexible Budget(1)(2) = (1)–(3)(3)(4) = (3) – (5)(5)Units550550Direct materials$12,705.00$1,815.00 U$10,890.00a$990.00 U$9,900.00bDirect labor$ 8,464.50$ 104.50U$ 8,360.00c$440.00 F $8,800.00dTotal price variance$1,919.50UTotal efficiency variance$550.00Ua7,260 meters ×$1.50 per meter = $10,890b550 lots ×12 meters per lot ×$1.50 per meter = $9,900c1,045 hours ×$8.00 per hour = $8,360d550 lots ×2 hours per lot ×$8 per hour = $8,800Total flexible-budget variance for both inputs = $1,919.50U + $550U = $2,469.50UTotal flexible-budget cost of direct materials and direct labor = $9,900 + $8,800 = $18,700 Total flexible-budget variance as % of total flexible-budget costs = $2,469.50÷$18,700 = 13.21%7-10
2.May2010Actual ResultsPrice VarianceActual Quantity ×Budgeted PriceEfficiency VarianceFlexible Budget(1)(2) = (1) – (3)(3)(4) = (3) – (5)(5)Units550550Direct materials$11,828.36a$1,156.16 U$10,672.20b $772.20 U $9,900.00cDirect manuf. labor$ 8,295.21d$ 102.41 U$ 8,192.80e$607.20 F $8,800.00cTotal price variance$1,258.57UTotal efficiency variance$165.00UaActual dir. mat. cost, May 2010 = Actual dir. mat. cost, May 2009 ×0.98 ×0.95 = $12,705 ×0.98 ×0.95 = $11.828.36Alternatively, actual dir. mat. cost, May 2010 = (Actual dir. mat. quantity used in May 2009 ×0.98) ×(Actual dir. mat. price in May 2009 ×0.95) = (7,260 meters ×0.98) ×($1.75/meter ×0.95) = 7,114.80 ×$1.6625 = $11,828.36b(7,260 meters ×0.98) ×$1.50 per meter = $10,672.20c Unchanged from 2009. dActual dir. labor cost, May 2010 = Actual dir. manuf. cost May 2009 ×0.98 = $8,464.50 ×0.98 = $8,295.21Alternatively, actual dir. labor cost, May 2010= (Actual dir. manuf. labor quantity used in May 2009 ×0.98) ×Actual dir. labor price in 2009= (1,045 hours ×0.98) ×$8.10 per hour= 1,024.10 hours ×$8.10 per hour = $8,295.21e (1,045 hours ×0.98) ×$8.00 per hour = $8,192.80Total flexible-budget variance for both inputs = $1,258.57U + $165U = $1,423.57U Total flexible-budget cost of direct materials and direct labor = $9,900 + $8,800 = $18,700 Total flexible-budget variance as % of total flexible-budget costs = $1,423.57÷$18,700 = 7.61%3.

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