8 29 30 min comprehensive variance analysis a

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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

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