# The causes of this variance the production volume

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the causes of this variance. The production-volume variance of \$6,000 F arises because the denominator used to allocate the \$90,000 of fixed indirect costs is 15,000,000 budgeted newsprint pages rather than the 16,000,000 actual newsprint pages which are used because actual output is 320,000 newspapers versus 300,000 budgeted. 8-29 (30 min.) Comprehensive variance analysis. a) Budgeted number of machine-hours planned can be calculated by multiplying the number of units planned (budgeted) by the number of machine-hours allocated per unit: 17,760 units × 2 machine-hours per unit = 35,520 machine-hours. b) Budgeted fixed MOH costs per machine-hour can be computed by dividing the flexible budget amount for fixed MOH (which is the same as the static budget) by the number of machine-hours planned (calculated in (a)): \$6,961,920 ÷ 35,520 machine-hours = \$196.00 per machine-hour c) Budgeted variable MOH costs per machine-hour are calculated as budgeted variable MOH costs divided by the budgeted number of machine-hours planned: \$1,420,800 ÷ 35,520 machine-hours = \$40.00 per machine-hour. d) Budgeted number of machine-hours allowed for actual output achieved can be calculated by dividing the flexible-budget amount for variable MOH by budgeted variable MOH costs per machine-hour: \$1,536,000 ÷ \$40.00 per machine-hour= 38,400 machine-hours allowed e) The actual number of output units is the budgeted number of machine-hours allowed for actual output achieved divided by the planned allocation rate of machine hours per unit: 38,400 machine-hours ÷ 2 machine-hours per unit = 19,200 units. f) The actual number of machine-hours used per panel is the actual number of machine hours used (given) divided by the actual number of units manufactured: 36,480 machine-hours ÷ 19,200 units = 1.9 machine-hours used per panel.
8-30 (60 min.) Journal entries (continuation of 8-29). 1. Key information underlying the computation of variances is: Actual Results Flexible Budget Amount Static-Budget Amount 1. Output units (panels) 19,200 19,200 17 , 760 2. Machine-hours 36,480 38,400 35 , 520 3. Machine-hours per panel 1.90 2.00 2.00 4. Variable MOH costs \$1,532,160 \$1,536,000 \$1 , 420 , 800 5. Variable MOH costs per machine- hour (Row 4 ÷ Row 2) \$42.00 \$40.00 \$40.00 6. Variable MOH costs per unit (Row 4 ÷ Row 1) \$79.80 \$80.00 \$80.00 7. Fixed MOH costs \$7,004,160 \$6,961,920 \$6,961,920 8. Fixed MOH costs per machine- hour (Row 7 ÷ Row 2) \$192.00 \$181.30 \$196.00 9. Fixed MOH costs per unit (7 ÷ 1) \$364.80 \$362.60 \$392.00 Solution Exhibit 8-30 shows the computation of the variances. Journal entries for variable MOH, year ended December 31, 2006: Variable MOH Control 1,532,160 Accounts Payable Control and Other Accounts 1,532,160 Work-in-Process Control 1,536,000 Variable MOH Allocated 1,536,000 Variable MOH Allocated 1,536,000 Variable MOH Spending Variance 72,960 Variable MOH Control 1,532,160 Variable MOH Efficiency Variance 76,800 Journal entries for fixed MOH, year ended December 31, 2006: Fixed MOH Control 7,004,160 Wages Payable, Accumulated Depreciation, etc. 7,004,160 Work-in-Process Control 7,526,400 Fixed MOH Allocated 7,526,400 Fixed MOH Allocated 7,526,400 Fixed MOH Spending Variance 42,240 Fixed MOH Control 7,004,160
Fixed MOH Production-Volume Variance 564,480
2. Adjustment of COGS Variable MOH Efficiency Variance 76,800 Fixed MOH Production-Volume Variance 564,480 Variable MOH Spending Variance 72,960 Fixed MOH Spending Variance 42,240 Cost of Goods Sold 526,080 SOLUTION EXHIBIT 8-30 Variable Manufacturing Overhead