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