50000 x 5hr 250000 8 26 2 the direct materials price

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50,000 x \$5/hr = \$250,000 8-26
2. The direct materials price variance indicates that DDC paid more for brass than they had planned. If this is because they purchased a higher quality of brass, it may explain why they used less brass than expected (leading to a favorable material efficiency variance). In turn, since variable manufacturing overhead is assigned based on pounds of materials used, this directly led to the favorable variable overhead efficiency variance. The purchase of a better quality of brass may also explain why it took less labor time to produce the doorknobs than expected (the favorable direct labor efficiency variance). Finally, the unfavorable direct labor price variance could imply that the workers who were hired were more experienced than expected, which could also be related to the positive direct material and direct labor efficiency variances. 8-29 (30 min.) Comprehensive variance analysis. 1. 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: 888 units × 2 machine-hours per unit = 1,776 machine-hours. 2. 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.)): \$348,096 ÷ 1,776 machine-hours = \$196.00 per machine-hour 3. Budgeted variable MOH costs per machine-hour are calculated as budgeted variable MOH costs divided by the budgeted number of machine-hours planned: \$71,040 ÷ 1,776 machine-hours = \$40.00 per machine-hour. 4. 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: \$76,800 ÷ \$40.00 per machine-hour= 1,920 machine-hours allowed 5. 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: 1,920 machine-hours ÷ 2 machine-hours per unit = 960 units. 6. The actual number of machine-hours used per output unit is the actual number of machine hours used (given) divided by the actual number of units manufactured: 1,824 machine-hours ÷ 960 units = 1.9 machine-hours used per output unit. 8-27
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 (food processors) 960 960 888 2. Machine-hours 1,824 1,920 1,776 3. Machine-hours per output unit 1.90 2.00 2.00 4. Variable MOH costs \$76,608 \$76,800 \$71,040 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 \$350,208 \$348,096 \$348,096 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, 2010: Variable MOH Control 76,608 Accounts Payable Control and Other Accounts 76,608 Work-in-Process Control 76,800 Variable MOH Allocated 76,800 Variable MOH Allocated 76,800 Variable MOH Spending Variance 3,648
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