Examples are kilowatts used quantities of lubricants

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Chapter 11 / Exercise 9
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measures that affect each cost item, one by one. Examples are kilowatts used, quantities oflubricants used, and repair parts and hours used. The most convincing way to discover whyoverhead performance did not agree with a budget is to investigate possible causes, line item byline item.Individual fixed overhead items are not usually affected very much by day-to-day control.Instead, they are controlled periodically through planning decisions and budgeting proceduresthat may sometimes have planning horizons covering six months or a year (for example,management salaries) and sometimes covering many years (for example, long-term leases anddepreciation on plant and equipment).8-0
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SOLUTION EXHIBIT 8-43Actual CostsIncurred(Actual Input Qty.Actual Rate)Actual Input Qty.Budgeted RatePurchases UsageFlexible Budget:Budgeted Input Qty.Allowed forActual Output Budgeted RateDirectMaterials163,000 $10.40$1,695,200163,000 $11.50$1,874,500126,600 $11.50$1,455,9006 20,000 $11.50$1,380,000DirectManuf.Labor21,000 $25.50$535,50021,000 $25$525,00019,190 $25$479,750Actual CostsIncurredActual Input Qty. Actual RateActual Input Qty.Budgeted RateFlexible Budget:Budgeted Input Qty.Allowed forActual Output Budgeted RateAllocated:Budgeted Input Qty.Allowed forActual Output Budgeted RateVariableMOH21,000 $9.63$202,30021,000 $10$210,00019,190$10$191,90019,190 $10$191,900Actual Costs Incurred(1)Same BudgetedLump Sum(as in Static Budget)Regardless ofOutput Level(2)Flexible Budget: Same BudgetedLump Sum(as in Static Budget)Regardless ofOutput Level(3)Allocated:Budgeted Input Qty.Allowed forActual Output× Budgeted Rate(4)FixedMOH$957,550$1,000,00050,000 × $20$1,000,00019,190× $20$383,8008-0$179,300 FPrice variance$75,900 UEfficiency variance$10,500 UPrice variance$55,750 UEfficiency variance$66,250 UFlexible-budget variance$7,700 FSpending variance$18,100 UEfficiencyNever a variance$10,400 UFlexible-budget varianceNever a variance$616,200 U $42,450 FFlexible-budget variance$616,200 UProduction volume varianceNever a variance$42,450 FSpending variance
8-44 Review of Chapters 7 and8, 3-variance analysis. (CPA, adapted) The BealManufacturing Company’s costing system has two direct-cost categories: direct materials anddirect manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated toproducts on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of2017, Beal adopted the following standards for its manufacturing costs:InputCost per OutputUnitDirect materials5 lb. at $4 per lb.$ 20.00Direct manufacturing labor4 hrs. at $16 per hr.64.00Manufacturing overhead:Variable$8 per DLH32.00Fixed$9 per DLH36.00Standard manufacturing cost per output unit$152.00The denominator level for total manufacturing overhead per month in 2017 is 37,000 directmanufacturing labor-hours. Beal’s budget for January 2017 was based on this denominator level.The records for January indicated the following:Direct materials purchased40,300 lb. at $3.80 per lb.Direct materials used37,300 lb.Direct manufacturing labor31,400 hrs. at $16.25 per hr.Total actual manufacturing overhead (variable and fixed)$650,000Actual production7,600 output unitsRequired:1.Prepare a schedule of total standard manufacturing costs for the 7,600 output units in January2017.

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