#MASReview1stSEM2018 Standard Costing
MAS04
.
,se of Echol
4e/uired ". Determi Determine n e the standard standard /uantity t y for each of the raw materials materials needed needed to produce an accepta'le "(-liter 'atch of 7ysap. %. Determine ne the standard standard la'or time me to produce produce an accepta'le accepta'le "(-liter ter 'atch of 7ysap. +. $ssumi $ssuming ng the following following purchase purchase prices prices and costs) costs) prepare prepare a standar standardd cost card for materials and la'or one accepta'le "(-liter 'atch of 7ysap Sale8 !".#( per liter 7yclyn %.:( per *ilogram !rotet +.(( per *ilogram Direct la'or cost 9.(( per hour
4e/uired ". Compute the standard standard purchase purchase price for one /uart /uart of Echol. Echol. %. Compute the the standard /uantity /uantity of Echol 0in /uarts1 per sala'le sala'le 'ottle of cleaning cleaning solvent. solvent. +. ,sing the data data from 0"1 and and 0%1 a'ove) prepare prepare a standard standard cost card card showing the the standard cost of Echol per 'ottle of cleaning solvent.
$
%. >%.(( per per foot foot 6 a' a'o r # di dir ec ect la la'o r ho ur urs = >: .# .#( pe per un unit $ctual Mater Material ial 9#)%# 9#)%# feet feet use usedd 0"(() 0"(()((( ((( feet feet pur purcha chased sed = >%.# >%.#(( per per foot1 foot1 6a'o 6a'orr "%%) "%%)2( 2((( dire direct ct la'or a 'or hou hours rs incu incurr rred ed per per uni unitt = >:. >:.+# +# per per hou hour r %#)#(( units were produced
Martina Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use of Echol follows !urchase of Echol . Echol is purchased in "#-gallon container at a cost of !""# per container. $ discount of %& is offered 'y the supplier for payment within "( days) and Martina Company ta*es all discounts. Shipping costs) which Martina Company must pay) amount to !"+( for an average shipment of "(( "#-gallon containers of Echol.
The 'ill of materials calls for . /uarts of Echol per 'ottle of cleaning solvent. 0There are four /uarts in a gallon.1 $'out #& of all Echol used is lost through spillage or evaporation on 0the . /uarts a'ove is the actual content content per 'ottle.1 In addition) statistica statisticall analysis y sis has shown shown that every 2"st 'ottle 'ottle is re3ected re3ected at final final inspecti inspection o n 'ecause 'ecause of contamination.
. Danson Company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution) called 7ysap) for which it needs to develop a standard product cost. The following information is availa'le on the production of 7ysap ng a chemical chemical compound 0nyclyn1 and a solution 0sale81) 0sale81) and 7ysap is made 'y com'ining 'oiling the mi8ture. $ %(& loss in volume occurs for 'oth the sale8 and the nyclyn during 'oiling. $fter 'oiling) the mi8ture consists of 9. liters of sale8 and "% *ilograms of nyclyn per "(-liter 'atch of 7ysap. $fter the 'oiling p rocess is complete) the solution is cooled s lightly 'efor e # *ilograms of protet are added per "(-liter 'atch of 7ysap. The addition of the protet does not affect the total li/uid volume. The resulting solution is then 'ottled in "(-liter containers. The finished product is highly unsta'le) and one"(-liter 'atch out of si8 is re3ected at final inspection. 4e3ected 'atches have no commercial value and are thrown out. It ta*es a wor*er +# minutes to process one "(-liter 'atch of 7ysap. Employees wor* an eight-hour day) including one hour per day for rest 'rea*s and cleanup. EE4CISES 5 !4<6EMS
4E?,I4ED 0$1. Compute the material purchase purchase price and /uantity variances. variances. 0<1. Compute the la'or rate and efficiency efficiency variances. "( %)2(( D6B used = >"(.%# per D6B $ssume that !@A hires pa rt-time employees for pro duction of these u nits. 4E?,I4ED Compute the price and efficiency variances.
!age " of "#
#MASReview1stSEM2018 Standard Costing
MAS04
#.(( $ctual D6 cost >)#( >" fi8ed overhead per D6B $ssume that S$ hires full-time employees who are pa id a total of >)#(( per month. 4E?,I4ED Compute the spending and volume variances. or each of the independent cases) fill in the missing figures. Case $ Case < ,nits produced :(( F Standard hours per unit + (.: Standard hours allowed F (( Standard rate per hour > F $ctual hours wor*ed %)++( # $ctual la'or cost F F 6a'or rate variance >2 >")(:( 6a'or efficiency variance F >:( ,
9.#( F >2)#( >%%: , F
Case D ")#(( F F > 2):# >%):"%.#( F >%)%#( ,
6 5 B "(e Each of the following independent situations relates to direct la'or. ill in the 'lan*s. $ < C D ,nits produced 2)((( GGGGG +)((( GGGGG $ctual hours wor*ed ")9(( :)2(( GGGGG GGGGG Standard hours for production achieved %)((( GGGGG GGGGG )((( Standard hours per unit GGGGG (.# % + Standard rate per hour >"% >"( >"% GGGGG $ctual la'or cost GGGGG >:+)(( GGGGG >%2)#(( 4ate variance >+"(, GGGGG >9((, >+(( Efficiency variance GGGGG >%)(((, >"):(( >:(( ,
EE4CISES 5 !4<6EMS
Carter 5 ,sry reutJer Candle Co. manufactures candles in various shapes) siJes) colors) and scents. Depending on the orders received) not all candles re/uire the same amount of color) dye) or scent materials. Hields also vary) depending upon the usage of 'eeswa8 or synthetic wa8. Standard ingredients for ")((( l's. of candles are Input Standard Mi8 Standard Cost per !ound ".(( Synthetic wa8 :2( .%( Colors %.(( Scents + .(( Totals ")(#( l's. Standard output ")((( l's. Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for Valentine's Day. Actual production then was: Input :( for engineers and >2( for draftspeople. or one pro3ect) the standard was set at +# hours of engineer time and %# hours of draftsperson time. $ctual hours wor*ed on this pro3ect were Engineers #(( hours at >:# per hour Draftspeople #(( hours at >2%.(( per hour Determine the la'or rate) mi8) and yield variances for this pro3ect. !age % of "#
#MASReview1stSEM2018 Standard Costing
MAS04
(."( per ounce lives + ounces at >(.+# per ounce Mushrooms + ounces at >(.#( per ounce 6a'or category " # minutes at >"% per hour 6a'or category % minutes at >: per hour During May %((") ?uintella produced "%)((( piJJas and used the following inputs nions %)((( pounds lives +)((( pounds Mushrooms %)((( pounds 6a'or category " ")+(( hours 6a'or category % ")((( hours During the month there were no deviations from standards on material prices or la'or rates. $. Determine the material / uantity) mi8) and yield variances. <. Determine the la'or efficiency) mi8) and yield variances. C. !repare the 3ournal entries to record the a'ove mi8 and yield variances. Carter 5 ,sry $t normal capa city) +( Direct la'or ( Indirect la'or +( 4epairs and maintenance "# Leneral factory e8penses "# > "#( i8ed e8penses are >"#()((( for indirect la'or) >"#)((( for repairs and maintenance) and >:()((( for general factory. EE4CISES 5 !4<6EMS
4E?,I4ED !repare a fle8i'le 'udget for the $ssem'ly Department at (&) :(&) 9(&) and "((& of normal capacity. Beathers !illow Company manufactures pillows. The %(82 operating 'udget is 'ased on production of %()((( pillo ws with (.# machine-hours allowed per pillow. ;aria'le manufacturing overhead is anticipated to 'e >%%()(((. $ctual production fo r %(82 was ":)((( pillows using 9)#(( mach ine-hours. $ctual varia'le costs we re >%( per machine- hour. 4e/uired Calculate the varia'le overhead spending and efficiency variances.
Borngren
6 5 B "(e Trom'ull Inc. ma*es gear casings. It has esta'lished the standard prices and /uantities for a finished unit as follows Materials 2 pounds at >+.(( per pound Direct la'or + hours at >" per hour ;aria'le overhead > per direct la'or hour 0D6B1 Trom'ull also has fi8ed overhead of >")((()((( per year. 4e/uired ill in the 'lan*s in the following items. ". The standard cost per unit of finished product is $.GGGGGfor materials. <.GGGGGfor direct la'or. C.GGGGGfor varia'le overhead. %. $t ()((( direct la'or hours) total varia'le overhead cost should 'eGGGGG. +. $t 9()((( direct la'or hours) production should 'eGGGGGunits. 2. If "(()((( pounds of materials are used) production should 'eGGGGGunits. #. $t ()((( direct la'or hours) total materials used should 'eGGGGGpounds. . If )((( pounds of materials are used) total varia'le overhead cost should 'eGGGGGand total la'or cost should 'eGGGGG.
!age + of "#
#MASReview1stSEM2018 Standard Costing
.
MAS04
65B 4alph Inc. had the following variances for the most recent month Direct 6a'or 4ate ;ariance >"2)#( , Direct 6a'or Efficiency ;ariance > +)( , ;aria'le verhead Spending ;ariance >"%)+%( ther information included actual wages paid >"(#)#(N materials purchased >"%2):(N standards per unit were % la'or hours at ># per hour and varia'le overhead at > per hour. 4e/uired a. ind the units produced. '. ind the standard la'or hours. c. ind the actual la'or hours. d. ind the varia'le overhead efficiency variance. e. ind the actual varia'le overhead. : per D6B. ;aria'le overhead is estimated at >+ per D6B. During @uly %((") )(( cars were registered in 6ancaster County) ta*ing +)(( direct la'or hours. or the month) varia'le overhead was >"()+( and fi8ed overhead was >%9)9#(. $. Comput e ove rhead varia nces u sing a four- varian ce ap proac h. <. Compute overhead variances using a three-variance approach. C. Compute overhead variances using a two-variance approach.
%()((( O >" per direct la'or hour. The com'ined overhead rate is >2( per direct la'or hour. The following data have 'een recorded for the year. $ctual total overh ead >")" ()((( Total overhead spending variance > +%)((( , ;olume variance > 2:)((( , ,se a three-variance approach to determine the following $. 7um'er of sta ndard hours allowe d <. $ctual direct la'or hours wor*ed EE4CISES 5 !4<6EMS
L57 lic* Company uses a standard cost system in which manufacturing overhead is applied to units of product on the 'asis of direct la'or-hours. The companyKs total 'udgeted varia'le and fi8ed manufacturing overhead costs at the denominator level of activity are >%()((( for varia 'le overhead and >+()((( for fi8ed overhead. The predetermined overhead rate) including 'oth fi8ed and varia'le components) is >%.#( per direct la'or-hour. The standards call for two direct la'or-hours per unit of output produced. 6ast year) the company produced "")#(( units of product and wor*ed %%)((( direct la'or-hours. $ctual costs were >%%)#(( for varia'le overhead and >+")((( for fi8ed overhead. 4E?,I4ED 0M1 a. Ahat is the denominator level of activityF '. Ahat were the standard hours allowed for the output last yearF c. Ahat was the varia'le overhead spending varianceF d. Ahat was the varia'le overhead efficiency varianceF e. Ahat was the fi8ed overhead 'udget varianceF f. Ahat was the fi8ed overhead volume varianceF L57 Tracton Corporation uses a standard costing system in which manufacturing overhead costs are applied to products on the 'asis of machine time. 4E?,I4ED a. Several num'ers and la'els have 'een omitted from the analysis of fi8ed overhead 'elow. Supply the missing num'ers and la'els. i8ed verhead Cost le8i'le ".(: > GGFGGGG > GGFGGGG > GGFGGGG ")::( , > GGFGGGG Total variance) >+:: '. Suppose that minutes of machine time is standard per unit of production. Bow many units were actually produced in the situation a'oveF c. $gain suppose that minutes of machine time is standard per unit of production. Bow many units of production were assumed when the predetermined application rate for fi8ed overhead was esta'lishedF !age 2 of "#
#MASReview1stSEM2018 Standard Costing
MAS04
Compute all varia'le cost variances. .
Borngren Mcenna Company manufactured ")((( units during $pril with a total overhead 'udget of >"%)2((. Bowever) while manufacturing the ")((( units the microcomputer that contained the monthKs cost information 'ro*e down. Aith the computer out of commission) the accountant has 'een una'le to complete the variance analysis report. The information missing from the report is lettered in the following set of data ;aria'le overhead Standard cost per unit (.2 la'or hour at >2 per hour $ctual costs >%)"(( for + hours le8i'le 'udget a Total fle8i'le-'udget variance ' ;aria'le overhead spending variance c ;aria'le overhead efficiency variance d i8ed overhead
e f >#(( favora'le
4e/uired Compute the missing elements in the report represented 'y the lettered items. 6 5 B "(e le8lu'e ma*es engine additives. Standard costs for a gallon of its ma3or product follow) along with actual results for March. Materials) # pounds at > per pound >+( Direct la'or at >"% per hour %2 ;aria'le overhead at > per D6B "% Total standard varia'le cost > $ctual results for March $. !roduction was ")%(( gallons. <. Material purchases were +)%(( pounds at >#.9( per pound. C. The company used )%(( pounds of materials in production. D. Direct la'orers wor*ed %)%#( hours at >"%."() earning >%)%%#. E. ;aria'le overhead was >"+):((. 4e/uired EE4CISES 5 !4<6EMS
!age # of "#
#MASReview1stSEM2018 Standard Costing
MAS04
65B "(e ill in the 'lan*s. ". Standard varia 'le costs per unit $. Materials 2 pounds = >GGGGG <. Direct la'orGGGGG hours = >"%.(( C. ;aria'le overhead >: per D6B %. !roduction +. Materials purchases) +%)((( pounds 2. Materials used at standard prices) +")%(( pounds #. Direct la'or) actualGGGGG hours . Material price variance . Material use variance :. Direct la'or rate variance 9. Direct la'or efficiency variance "(. ;aria'le overhead spending variance "". ;aria'le overhead efficiency variance "%. $ctual varia'le overhead cost
. 7um'er of unit s manufactured
>GGGGG >.(( >GGGGG :)((( units >%)((( >GGGGG >2)%(( >%)((( , >GGGGG >%)((( >GGGGG >")#(( >GGGGG >GGGGG
"% per hour1 > 2: actory overhead 0"()((( D6B e8pected capacity1 ;aria'le 02 hours = >" per hour1 2 i8ed 02 hours = >: per hour1 +% Total unit conversion cost >"22 The following data are given for Decem'er) when :)((( standard la'or hours were used 6a'or rate variance > 2)#(( , 6a'or efficiency variance "%)((( , $ctual varia'le overhead "#+)((( $ctual fi8ed overhead :)((( Calculate the answers for the following un*nowns $. Total applied factory overhead <. ;olume variance C. ;aria'le overhead spending variance D. ;aria'le overhead efficiency variance E. Total actual overhead EE4CISES 5 !4<6EMS
!age of "#
#MASReview1stSEM2018 Standard Costing
EE4CISES 5 !4<6EMS
MAS04
!age of "#
i .
". !".9( %. :.%( /uarts +. !"#.#:
0!""# 8 (.9: O !".+(1 P "# P 2 Q !".9( 0. P (.9#1 8 2"R2( Q :.%( :.%( /uarts 8 !".9(R/uart
ii
?uantity,nit Cost$mountSale89. P (.: 8 R# "2.2(!".#(%".(7yclyn"% P (.: 8 R# ":.((%.:(#(.2(!rotet# 8 R#.((+.((":.((Direct la'or: P 8 +#R( 8 R#(.:(9.((.%(Total9.%( iii
Material !urchase !rice and ?uantity ;ariances Material price variance"(()((( 8 >%.#( Q>%#()((("(()((( 8 >%.( Q %()(((> "()(((Material /uantity variance9#)%# 8 >%.( Q>%2:)%#:9)%#( 8 >%.( Q %+%)(#(> ")##, 6a'or 4ate and Efficiency ;ariance 6a'or rate variance"%%)2(( 8 >:.+# Q>")(%%)(2("%%)2(( 8 >:.#( Q ")(2()2((> ":)+(6a'or efficiency variance"%%)2(( 8 >:.#( Q>")(2()2(("%)#(( 8 >:.#( Q ")(:+)#(> 2+)+#( iv
%)2(( 8 >"(.%#>%2)((%)2(( 8 >"(.(( %2)(((!rice variance> >"(.(( +()(((Efficiency variance> )(((
((,%)2(( 8 >"(.((>%2)(((0")#(( 8 %1 8
v
$ctual la'or cost>)#( %#(,)#((Standard la'or cost 0:(( 8 %1 8 >#:)(((;olume variance>")#(( vi
,nits produced Std. hrs. per unit Std. hrs allowed Std. rate per hour $ctual hrs. wor*ed $ctual la'or cost 6a'or rate variance 6a'or efficiency variance
Case $ :(( + %)2(( > %)++( >"#):22 >2 >29(
Case $ Std. hrs. allowed Q :(( + Q %)2(( 64; Q $?0$! - S!1 ->2 Q %)++(0$! - >1 ->2 Q %)++($! - >")+"( >"#):22 Q %)++($! >.:( Q $! $ctual la'or cost Q >.:( %)++( Q >"#):22 6E; Q S!0$? - S?1 6E; Q >0%)++( - %)2((1 Q >0(1 Q >29( Case < ,nits produced Q (( P (.: Q #( 6E; Q S!0$? - S?1 >:( Q S!0(( - #1 >:( Q S!0#1 >"(.2( Q S! 64; Q $?0$! - S!1 ->")(:( Q #0$! - >"(.2(1 ->")(:( Q #$! - >)(%( >#)92( Q #$! >:.:( Q $! $ctual la'or cost Q >:.:( # Q >#)92( Case C Std. hrs. allowed Q 2:( P %2( Q % 64; Q $?02)#( P $?1 - S!U >%%: Q $?0>2)#( P $?1 - >9.#(1 >%%: Q >2)#( - >9.#($? ->2)++% Q ->9.#($? 2# Q $? 6E; Q S!0$? - S?1
Case < #( .: (( >"(.2( # >#)92( >")(:( >:(,
Case C Case D %2( ")#(( %.( + 2:( 2)#(( >9.#( > 2# 2):# >2)#( >%):"%.#( >%%:, >%)2+.#( >%%: >%)%#(,
6E; Q >9.#(02 - 2:(1 Q >9.#(0-%21 Q >%%: Case D $ctual la'or rate Q >%):"%.#( P 2):# Q >#.#( 64; Q $?0$! - S!1 64; Q 2):#0>#.#( - >1 Q >%)2+.#( 6E; Q S!0$? - S?1 >%)%#( Q >02):# - S?1 >%)%#( Q >%9)%#( - >S? ->%)((( Q ->S? 2)#(( Q S? Std. hrs. per unit Q 2)#(( P ")#(( Q + vii
0a1 (.#( standard hours) %)((( total standard hoursR2)((( units produced >%+)""( actual la'or cost) ")9(( actual hours 8 >"% standard rate O >+"( unfavora'le rate variance >")%(( favora'le efficiency variance) %)((( standard hours - ")9(( actual hours Q "(( hours under standardN "(( 8 >"% Q >")%(( 0'1 >2(( favora'le rate variance) :)2(( actual hours 8 >"( Q >:2)((( 'udgeted cost less >:+)(( actual cost Q >2(( :)%(( standard hours) :)2(( actual hours - 0>%)((( unfavora'le efficiency varianceR>"(1 standard rate per hour. r) >%)(((R>"( Q %(( hours over standard) so that :)2(( actual hours are %(( over standard. ")2(( units produced) :)%(( standard hoursR(.#( standard hours per unit 0c1 )((( standard hours) +)((( units 8 % hours per unit #):#( actual hours) efficiency variance of >"):((R>"% standard rate Q "#( hours 'elow standardN )((( standard "#( Q #):#( >")"(( actual la'or cost 0#):#( actual hours 8 >"% Q >()%(( 'udget for #):#( hours) plus >9(( unfavora'le rate variance Q >")"((1 0d1 %)((( units produced) )((( standard hoursR+ hours per unit >2 standard rate) >%2)#(( actual cost O >+(( favora'le rate variance - >:(( unfavora'le efficiency variance Q >%2)((( standard cost for )((( standard hours. >%2)(((R)((( Q >2 )%(( actual hours) )((( standard hours O 0>:(( unfavora'le efficiency varianceR>2 standard rate1. r) %(( hours over standard) from >:((R>2. viii
$ctual /uantities at individual standard materials cost>"")%(0"1$ctual input /uantity at weighted average of standard materials cost 0%()"( 8 >.+:"10%1 >):" Materials mi8 variance>+)9+9 unfav.$ctual input /uantity at weighted average of standard materials cost 0%()"( 8 >.+:"10%1 >):"$ctual output /uantity at standard materials cost per pound of output 0":)#(( l's. 8 >.2(10+1 )2((Materials yield variance>%:"unfav. 0"1 " per l'.>2)"(( Synthetic wa8"+):((l's.= >.%( per l'.%)(Colors%)%((l's.= >% per l'.2)2(( Scents (l's.= > per l'.+(%()"(l's.> "")%( 0%1Aeighted average standard materials costs ">%((Synthetic wa8:2(l's.= >.%(": Colorsl's.= >%"2 Scents +l's.= >":")(#(l's.>2(( Standard materials cost >2(( >2(( Q Q >(.2(Rl'. costRunit of output Q >(.+:"Rpound 0+1 Standard materials cost Q Stanard output ") ((( l's. ")(#( l's. i
6et E represent engineers) and D represent draftspeople Standard Mi8 Q +R: E and #R: D $ctual Mi8 Q #(& E and #(& D Standard ?uantity 0Bours $llowed1 Q ")((( hrs. $ctual cost of E Q >:# #(( Q >2%)#(( $ctual cost of Class D Q >2% #(( Q >%")((( Standard rateN actual mi8 5 /uantity of E Q >:( #(( Q >2()((( Standard rateN actual mi8 5 /uantity of D Q >2( #(( Q >%()((( Standard rate 5 mi8N actual /uantity of E Q >:( +R: ")((( Standard rate 5 mi8N actual /uantity of D Q >2( #R: ")(((
Q >+()((( Q >%#)(((
Standard for E Q >:( +R: ")((( Q >+()((( Standard for D Q >2( #R: ")((( Q >%#)((( $? 8 $! 0>2%)#(( O >%")(((1
>+)#((
$? 8 S! 0>+()((( O >%()((1 6a'or 4ate ;ariance
()((( > +)#(( ,
$? 8 S! 0>+()((( O >%()((1 $? 8 A$S! 6a'or Mi8 ;ariance
>()((( ##)((( > #)((( ,
$? 8 A$S! S? 8 S! 0>+()((( O >%#)((( 6a'or Hield ;ariance
>##)((( ##)((( > - .
a. nions lives Mushrooms
Standard mi8 "R+ "R+ "R+
$ctual mi8 %R +R %R
Standard /uantity Q0"%)((( units 9 oJs.1 P " oJ. per l'. Q )#( l's. Std. costN actual /uantity 5 mi8 nions %)((( >".( Q lives +)((( >#.( Q Mushrooms %)((( >:.(( Q
> +)%(( "):(( ")((( >+)(((
Std. cost 5 mi8N actual /uantity nions "R+ )((( >".( Q lives "R+ )((( >#.( Q Mushrooms "R+ )((( >:.(( Q
> +)++ "+)( ":) >+#)2
Standard cost) /uantity) mi8 nions "R+ )#( >".( Q lives "R+ )#( >#.( Q Mushrooms "R+ )#( >:.(( Q
> +)(( "%)(( ":)((( >+2)%((
$? 8 S! $? 8 A$S! Materials Mi8 ;ariance
>+)((( +#)2
$? 8 A$S! S? 8 S! Materials Hield ;ariance Material ?uantity ;ariance
>+#)2 +2)%((
'. 6a'or " 6a'or %
> #++ ,
")% , >"):(( , Standard mi8 #R"" R""
$ctual mi8 "+R%+ "(R%+
Standard hours allowed Q 0"%)((( "" minutes1 P ( minutes per hour Q %)%(( hours Std. rateN actual mi8 5 hours V" Q ")+(( >"% Q V% Q ")((( >: Q
>"#)(( :)((( >%+)((
Std. rate 5 mi8N actual hours V" Q #R"" %)+(( >"% Q V% Q R"" %)+(( >: Q
>"%)#2# "()(+ >%%)#:"
Standard rate) mi8) hours V" Q #R"" %)%(( >"% Q V% Q R"" %)%(( >: Q
>"%)((( 9)(( >%")((
$B 8 S4 $B 8 A$S4 6a'or Mi8 ;ariance
>%+)(( %%)#:"
$B 8 A$S4
>%%)#:"
>")("9 ,
SB 8 S4 6a'or Hield ;ariance 6a'or Efficiency ;ariance c. Aor* in !rocess Material Mi8 ;ariance Material Hield ;ariance 4aw Material - nions 4aw Material - lives 4aw Material – Mushrooms Aor* in !rocess 6a'or Mi8 ;ariance 6a'or Hield ;ariance Aages !aya'le i
%")(( 9:" , >%)((( , +2)%((.(( #++.++ ")%. +)%(( "):(( ")((( %")(( ")(%( 9:( %+)((
.
$ssem'ly Departmentle8i'le %"()(((>%2()(((>%()(((>+(()(((Direct la'or2%()(((2:()(((#2()((((()(((Indirect la'or%"()(((%2()(((%()(((+(()(((4epairs and maintenance"(#)((("%()((("+#)((("#()(((Leneral factory e8penses"(#)((("%()((("+#)((("#()(((Total varia'le cost>")(#()(((>")%(()(((>")+#()(((>")#(()((( i8ed costIndirect la'or"#()((("#()((("#()((("#()(((4epairs and maintenance"#)((("#)((("#)((("#)(((Leneral factory:()(((:()(((:()((( :()(((Total fi8ed cost> 2(#)(((> 2(#)(((> 2(#)(((> 2(#)(((Total cost> ")2##)(((> ")(#)(((>")##)(((> ")9(#)((( ii
%%()(((R0%()((( 8 (.#1 machine-hours Q >%% Spending variance Q 0>%% - >%(1 8 9)#(( Q >"9)((( favora'le Efficiency variance Q 9)#(( - 0%()((( 8 (.#1U 8 >%% Q >"")((( favora'le iii
This 'asic e8ercise deals with the concept of standards as Wshould 'eW /uantities and costs. It also treats relationships. ". 0a1 >"% 02 pounds 8 >+1 0'1 >2: 0+ hours 8 >"1 0c1 >": 0+ hours 8 >1 %. >2%()(((
()((( 8 >
+. +()((( units 09()((( hoursR+ hours per unit1 2. %#)((( units 0"(()((( poundsR2 pounds per unit1 #. :()((( pounds 0()((( hoursR+ hours per unit1 Q %()((( unitsN 2 pounds 8 %()((( units Q :()((( pounds . >%9)((( varia'le overhead )((( l'sR2 l's per unit Q ")#(( units) ")#(( units 8 + hours per unit Q 29)#(( hours 8 > per hour Q >%9)((( varia'le overhead >9%)((( la'or) 29)#(( hours 8 >" per hour Q >9%)((( la'or iv
a. '. c. d. e.
:)+2 units ")2: SB ":)%(( $B >2)+9% , >9)::(
0>"(#)#( - "2)#( - +)(1 R 0% 8 >#1 :)+2 8 % 0>"(#)#( - "2)#(1 R ># 0":)%(( - ")2:1 8 0":)%(( 8 >1 - >"%)+%(
v
a. our-way ;ariance ;aria'le verhead $ctual + 8 +)(( ;B Spending ;ariance + 8 +)(( $pplied >+ 8 +):(( ;B Efficiency ;ariance Total ;B ;ariance i8ed verhead $ctual
>"()+( "")"(( >+( >"")"(( "")2(( +(( >( >%9)9#( +%)((( >%)(#(
: 8 +):(( ;olume ;ariance Total B ;ariance '. Three-Aay ;ariance $ctual 0>"()+( O >%9)9#(1 +%)((( O 0>+ 8 +)((1U Spending ;ariance
>+%)((( +()2(( ")(( , > 2#( >2():( 2+)"(( >%)2%(
+ 8 +):((1U Efficiency ;ariance
>2+)"(( 2+)2((
""1 ;olume ;ariance Total ;ariance
>2+)2(( 2"):((
c. Two-way ;ariance $ctual 0>"()+( O >%9)9#(1 + 8 +):((1U ""1 ;olume ;ariance Total ;ariance
+((
")(( , >")"%( >2():( 2+)2(( %)%( >2+)2(( 2"):(( ")(( , >")"%(
vi
a. $ctual %()((( O 0>" 8 %:)(((1 B Spending ;ariance
>")"()((( ")"%:)((( > +%)((( ,
%()((( O 0>" 8 %:)(((1
>")"%:)((( ")":)((( > 2()(((
>")":)((( ")"%()((( > 2:)((( ,
E8planation The fi8ed overhead rate per hour is >%2 0>2( com'ined - >" varia'le from the fle8i'le 'udget formula1. %()((( divided 'y the >%2 B rate Q e8pected annual capacity of +()((( hours. Dividing the volume variance of >2:)((( 'y the >%2 B rate gives %)((( hoursN this is the difference 'etween the standard hours and the e8pected annual capacity in hours. Since the volume variance was unfavora'le) standard hours are lower than e8pected annual capacity. SB Q %:)(((. '. Spending variance Q $ctual - 0+%)((( , Q >")"()((( - >")"%:)((( ")"%:)((( Q 0>" per hr. $ctual Brs.1 O >%()((( >2(:)((( Q >" $ctual Brs %#)#(( Q $ctual Bours xvii
a. Total overhead at the denominator level of activity 0a1>#()(((!redetermined overhead rate 0'1>%.#(RD6BDenominator level of activity 0a1 0'1%()((( D6Bs'. $ctual output"")#(( unitsStandard D6B per unit8 % D6B per unitStandard D6Bs allowed%+)((( D6Bs c. Computation of varia'le overhead spending variance Spending variance Q 0$B 8 $41 - 0$B 8 S41 Q 0>%%)#((1 - 0%%)((( D6Bs 8 >".((X1 Q >#(( , X >%()((( P %()((( D6Bs Q >".(( d. Computation of varia'le overhead efficiency variance Spending variance Q 0$B 8 S41 - 0SB 8 S41
Q 0%%)((( D6Bs 8 >".((1 – 0%+)((( D6BsX 8 >".((1 Q >")((( X % D6Bs per unit 8 "")#(( units Q %+)((( D6Bs e. Computation of the fi8ed overhead 'udget variance +")((( - >+()((( Q >")((( , f.
Computation of the fi8ed overhead volume variance ;olume variance Q i8ed portion of predetermined overhead rate 8 0Denominator hours – Standard hours allowed1 Q >".#(X 0%()((( D6B - %+)((( D6B1 Q >2)#(( X>+()((( P %()((( D6B Q >".#(
xviii
a. $ctual i8ed verhead Cost >+%#)::( le8i'le +%2)(((i8ed verhead Cost $pplied to Aor* in !rocess +(%)"(( MB 8 >".(: >+%)%:")::( ,;olume ;ariance >%)%: Total variance) >+:: Computations -- in this order 07ote Ahen used in the 'elow alge'raic formulas) favora'le variances are negative and favora'le variances are positive.1 ;olume variance Q Total variance - +:: - >")::( , Q ->+:: - >")::( Q ->%)%: Q >%)%: i8ed overhead applied Q +(%)"(( MB >".(: Q >+%)%: le8i'le 'udget fi8ed overhead Q i8ed overhead applied - ;olume variance Q >+%)%: - >%)%: Q >+%)%: O >%)%: Q >+%2)((( $ctual fi8ed overhead Q i8ed overhead applied O Total variance Q >+%)%: O >+:: Q >+%)%: - >+:: Q >+%#)::( '. Standard MB allowed for production) . Standard hours allowed per unit ,nits produced
+(%)"(( P (." +)(%")(((
c. i8ed overhead in fle8i'le 'udget) 0a1 a'ove > +%2)((( Standard cost per machine hour P >".(: MB assumed in fle8i'le 'udget +(()((( Standard hours allowed per unit P (." ,nits assumed in fle8i'le 'udget +)((()((( i
a. '. c. d. e. f.
")((( 8 (.2( 8 >2 Q >")(( >%)"(( - >")(( Q >#(( unfavora'le >%)"(( - 0+ 8 >21 Q >#9 unfavora'le >")#(2 - >")(( Q >9 favora'le >"%)2(( - >")(( Q >"():(( >"():(( - >#(( favora'le Q >"()+((
This e8ercise is straightforward) 'ut some students will have trou'le with materials 'ecause the /uantity used e8ceeds the /uantity purchased. Despite their continual e8posure to inventories) students sometimes miss the point that purchases can well 'e less than use. Some students also might have difficulty determining standard la'or hours. They do not have to ma*e the calculation 0>%2R>"% Q % standard hours1 to complete the assignment. Ae also give the materials variances in a different format. Hou might wish to show students that format is not the critical element. Materials variances !rice variance $ctual cost of purchases) >#.9( 8 +)%(( avora'le variance ,se variance Standard cost of materials used) )%(( 8 > Standard cost of standard /uantity) ")%(( 8 # 8 > ,nfavora'le use variance
>+)%(( +)((( > ")%(( ,
6a'or variances $ctual Cost "% 8 %)%#(1 4ate variance
>%)%%# %)((( > %% # ,
"% or ")%(( 8 >%21 Efficiency variance
>%)((( %:):(( > "):((
;aria'le overhead variances $ctual Cost 8 %)%#(1
>"+):(( "+)#(( > +(( ,
>"+)#(( "2)2(( > 9((
>":)::( "9)%(( > +%(
This e8ercise lends itself to using the differences 'etween standard and actual rates to determine priceRrate variances. Material price variance Q 0>.(( - >#.9(1 8 +)%(( 6a'or rate variance Q 0>"%.(( - >"%."(1 8 %)%#(
> +%( > %%# ,
". 0a1 >%.(( per pound) >:.(( per unit of product. $ctual material cost 0from +1 !lus favora'le material price variance 0from 1 Standard material cost for the +%)((( pounds purchased Divided 'y the num'er of pounds purchased 0from +1 E/uals standard cost per pound Times the num'er of pounds in each finished unit 0from "a1 E/uals standard material cost per pound
>%)((( %)((( >2)((( +%)((( > %.(( 2 > :.((
i
0'1 (.#( hours Standard la'or cost per unit 0from "'1 Divided 'y standard cost per hour 0from "'1 E/uals standard num'er of hours per finished unit 0c1 >2.(( per unit Standard rate per hour) given Times num'er of hours per unit 0from "') computed a'ove1 E/uals standard varia'le overhead per unit
> .(( >"%.(( (.#( >:.(( (.#( >2.((
2. >%)2(( 7um'er of pounds of material used) given Times standard material cost per pounds 0from "a a'ove1 E/uals material used at standard cost
+")%(( >% >%)2((
#. 2)"(( hours Total actual la'or cost !lus favora'le la'or rate variance 0from :1
>2)%(( %)((( >29)%(( >"%
E/uals actual la'or hours
2)"((
. >")(( favora'le Material used) at standard rates 0computed in 2 a'ove1 Standard use) :)((( 8 2 pounds per unit 8 >% per pound avora'le material use variance
>%)2(( 2)((( > ")((
9. >")%(( unfavora'le 0"(( hours 8 >"%1 Standard num'er of hours re/uired to produce :)((( units 8 (.#( hours per unit 0computed in "'1 $ctual hours wor*ed 0computed in #1 Bours over standard
:)((( units 2)((( 2)"(( "((
"". >:(( unfavora'le Bours over standard 0from 91 Times standard varia'le overhead cost per hour 0from "c1 E/uals favora'le variance overhead efficiency variance
"(( >: >:((
"%. >+")+(( Standard varia'le overhead at standard rates :)((( units 8 >2 per unit 0computed in "c1 >+%)((( !lus unfavora'le efficiency variance 0from ""1 :(( : +%):(( 6ess favora'le spending variance 0from "(1 ")#(( $ctual overhead >+")+(( $ shorter solution is to go immediately to 'udgeted varia'le overhead for 2)"(( hours) >+%):(( 02)"(( 8 >:1 and su'tract the >")#(( favora'le 'udget variance. ii
0The items mar*ed with an X were given.1 $ctual 6a'or Cost "% 8 9)(((1 6a'or 4ate ;ariance
>""%)#(( "(:)(((
"% 8 9)(((1 $pplied 6a'or Cost 0>"% 8 :)(((1
2)#(( ,X "(:)((( 9)((( "%)((( ,X
: B rate Q >:()(((
$ctual B 0>"#+)((( O >:)(((1 " 8 9)(((1 O :()((( Spending ;ariance
>%+")((( %%2)((( > )((( ,
" 8 9)(((1 O :()((( " 8 :)(((1 O :()((( Efficiency ;ariance
>%%2)((( %(:)((( > ")((( ,
" 8 :)(((1 O :()((( $pplied verhead :)((( 8 0>" O >:1 ;olume ;ariance
>%(:)((( "9%)((( > ")((( ,
a. '. c. d. e. f.
Total applied overhead Q >"9%)((( ;olume variance Q >")((( , ;B spending variance Q >"#+)((( - >"22)((( Q >9)((( , ;B efficiency variance Q >")((( , Total actual overhead Q >%+")((( 7um'er of units manufactured Q :)((( P 2 Q %)(((
