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.
8-29

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, 2003:
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
8-30

8-30
(Cont.d’)
Journal entries for fixed MOH, year ended December 31, 2003:
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
8-31

SOLUTION EXHIBIT 8-30
Variable Manufacturing Overhead
Actual Costs
Incurred
(1)
Actual Inputs
× Budgeted Rate
(2)
Flexible Budget:
Budgeted Input
Allowed for
Actual Output
× Budgeted Rate
(3)
Allocated:
Budgeted Input
Allowed for
Actual Output
× Budgeted Rate
(4)
(36,480
×
$42)
$1,532,160
(36,480
×
$40)
$1,459,200
(38,400
×
$40)
$1,536,000
(38,400
×
$40)
$1,536,000