Student Sol13 4e

STUDENT SOLUTIONS MANUAL

CHAPTER CHAPTER 13 THE FLEXIBLE-BUDGET FLEXIBLE-BUDGET AND STANDA STANDARD RD COSTING: DIRECT MA M ATERIALS AND DIRECT LABOR EXERCISES 13-34 Flexible Bu!e" #$ %#&i#$'e( (30 min) 1. Flexible budget budget for for June, at 90% of the the master-budget master-budget level !nits sold "ales (90% x #$00,000) 'ariable exenses (90% x #*0,000) +ontribution margin Fixed exenses udgeted oerating inome

900 #&0,000 0*,000 #31*,000 1*0,000 )1*+,

&. efer to text /xhibit 13.1 for master-budget data a. "ales "ales volum volume e varian variane, e, in in terms terms of operating income  flexible-budget oerating inome – master master (stati) budget oerating inome  #1*,000 - #&00,000  )3+,U or, budgeted m2unit x (atual sales volume - master budget sales volume)  #3*02unit x (900 - 1,000) units  )3+,U b. "ales volume variane, in terms of contribution margin  flexible-budget ontribution margin - master (stati) budget ontribution margin  #31*,000 - #3*0,000 

)3+,U

or, budgeted m2unit x (atual – master master budget) sales volume  #3*02unit x (900 – 1,000) 1,000) units  )3+,U 3. tual 4erating esults esu lts For the 5onth of June "ales (900 x #$0) 6otal variable exenses +ontribution margin Fixed exenses 4erating inome Blocher, Stout, Cokins, Chen, Cost Chen, Cost Management, 4/e

#*,000 1,000 #3&,000 1$0,000 #1&,000 13-1

©The McGraw-Hill Companies, 2!


13-34 (+ontinued) a" 6otal flexible-budget variane  atual oerating inome - flexible-budget oer oerat atin ing g ino inom me  #1& #1&,0 ,000 00 - #1*,000  )3,U

b. 6otal variable variable ost flexible-budget flexible-budget variane variane  atual variable variable osts osts 7 flexibleflexible).,U budget variable osts  #1,000 - #0*,000  or, 8 x ( - ")  900 units x (#0 - #*0)2unit  ).,U . 6otal fixed ost flexible-budget variane  atual fixed osts 7 flexible-budget fixed osts  #1$0,000 - #1*0,000  )3,U d. "elling rie rie variane  atual atual sales revenue 7 flexible-budget flexible-budget sales sales revenue revenue  #*,000 - #&0,000  )3*,F or, 8 x ( - ")  900 units x (#$0 - #$00) 

)3*,F

:46/ total flexible-budget variane ()3,U ( )3,U))  selling rie variane ()3*,F ( )3*,F)) ).,U ) ; total fixed ost flexible; total variable ost flexible-budget variane ( ).,U) budget variane ()3,U ()3,U). ). 6he follo?6 5+=>:/@ +45:@ nalAsis of 4erating esults June &00 Flexible A'"u#l !nit sales 900 "ales (900 x #$0) 6otal variable exenses +ontribution margin Fixed exenses 4erating inome

Bu!e" 900 #*,000 1,000 #3&,000 1$0,000 #1&,000

S"#"i' M#("e&2 Bu!e" 1,000 #&0,000 0*,000 #31*,000 1*0,000 #1*,000

#$00,000 *0,000 #3*0,000 1*0,000 #&00,000

6otal 5aster ("tati) udget 'ariane #3$,00! Flexible-budget Flexible-bud get 'ariane #3,000!

Blocher, Stout, Cokins, Chen, Cost Chen, Cost Management, 4/e

13-2

"ales 'olume 'ariane #3*,000!



13-3*

Flexible Bu!e"( #$ %#&i#$'e A$#l(i( (&* minutes)

1.

Flexible"ales udget Flexible 'olume 5aster 5aster tual 'ariane udget 'ariane udget 3,$00 -03,$00 &00! ,000

!nits "ales 'ariable osts 5anufaturing "elling B dmin. 6otal variable osts +ontribution margin Fixed osts 5a 5anufaturing "e "elling B dmin. 6otal fixed osts #&,000 4erating inome

#*3,&00

#3,$00!

#*,000

1

#3,000!

#0,000

#19,000 ,00 #&,00 #&,*00

#3,$00! 100! #3,900! ),U

#1*,&00 ,00 #&&,$00 #3,&00

&

#$00F 0  00F 1,&00F )1,5U

#1,000 $,000 #&,000 #3,000

#1,000 10,000 #&,000

#1,000! 1,000! #&,000!

#1*,000 9,000 #&,000

#

).,U

#10,&00

*00

3

#1*,000 9,000 - 0 #1&,000

)1,5U

1

udgeted selling rie er unit x number of units sold  (#0,0002,000) x 3,$00 units  #1* er unit x 3,$00 units  #*,000

&

"tandard variable manufaturing ost er unit x number of units sold  (#1,0002,000) x 3,$00 units  # variable manufaturing ost er unit x 3,$00 units  #1*,&00

3

"tandard variable selling and administrative exense er unit x number of units  (#$,0002,000) x 3,$00 units  #& er unit x 3,$00 units  #,00

"ales volume varianes >n terms of ontribution margin >n term of oerating inome

#3,&00 - #3,000  #10,&00 - #1&,000 

)1,5U )1,5U

Flexible-budget varianes +ontribution margin 4erating inome

#&,*00 - #3,&00  #*00 - #10,&00 

),U ).,U


13-3



13-3* (ontinued) &. 6he omanA redued its selling rie (from #1* er unit to #1 er unit) to omete in the marCet, suggesting that the firm is ursuing a ost-leadershi, not differentiation, differentiation, ometitive ometitive strategA for the rodut. =o
!nits sold "ales revenue 'ariable manufa-turing -osts 'aria riable selling B administ istrat ratuve - os osts Fixed manufa-turing - osts

A'"u#l Re(ul" (

3,$00 #*3,&00 #19,000 #%,%00 #1,000


M#(" e& Bu!e"

),000 #0,000 #1,000 #$,000 #1*,000

13-#

A'"u#l Pe& U$i"

#1).00 #*.00 #&.03

Bu!e"e Pe& U$i"

#1*.00 #).00 #&.00



13-35 A66e$ix2: 89u&$#l E$"&ie( (10 minutes) 4t. 

5aterials >nventorA (&0 lbs. x #02lb.)

#&$,$00

5aterials Purchase rie 'arianeH'+ (&0 I #12lb.)

#&0

ounts aAable (&0 lbs. lbs . x #12lb.)

#&9,*&0

urhased &0 ounds of '+ at #12lb. standard rie  #02lb. 4t. 9

G orC-in-roess >nventorA ($0 units x #02unit) 5aterials !sage 'arianeH'+

#31,&00 #&,00

5aterials >nventorA (&0 lbs. x #02lb.)

#&$,$00

>ssued &0 ounds of '+ for the rodution of $0 units of I'-1. "tandard usage is 1 lb. er unit of I'-1, at #0 er ound.


13-$



13-4 M#"e&i#l( %#&i#$'e(;9&
tual Purchases at "tan "tanda dard rd +ost +ost (8) x (") 0,000 lbs. x #3.*02lb.  #10,000

urhase rie 'arianeK tual Usage at "tandard +ost (8) x (")

Flexible- udget mount ("8) x (")

3$, 3$,000 lbs. x #3. #3.*02l 02lb.

"8 x #3.*02lb 02lb..

#,*00 ! !sage 'ariane 1. urhase urhase rie rie er ound ound for for diret diret materi materials als #1&0,000

÷

0,000 lbs.  )30 6e& lb0

&. 6otal atual ost of diret materials urhased

#1&0,000

6otal otal dire dire t materia erialls ur urhas hased (o (ounds) nds) "tan "tanda dard rd ost ost er er oun ound d of dire diret t mate materi rial als s

0,0 0,000 x

3.*0 3.*0

6otal standard ost of diret materials urhased

10,000

?iret materials purchase r  rie variane

) >,F

3. 6otal diret diret materials materials used used at standard standard ost ost  3$,000 3$,000 x #3.*0 #133,000 #133,000 Less unfavorable diret materials usage variane

7

"tandard ?5 ost for the units manufatured 

#1&,*00

"tandard o ost e er lb lb. of of di diret ma materia rial

÷

6otal standard MuantitA of ?5 for the units 5anufatured lb(0


13-%



,*00 #3.*0 3*,143



13-4> Be/#?i9&#l C9$(ie&#"i9$( (1*-&0 minutes) 1. 5anager 5anagerial ial time time an be onsider onsidered ed a sare sare resoure resoure.. 6ime 6ime sent in terms terms of seuring oerational ontrol detrats from time sent dealing n short, therefore, timelA reorting of standard ost varianes allo< managers to taCe orretive ation before osts (and the underlAing sAstem) get out of ontrol.  breaCdon the former ase, the standards tend to redue rodutivitA in the latter ase, in the extreme, emloAees simlA ignore the standardsHthat is, theA do not not Dint Dinter erna naliliOe Oe the the stan standa dard rds s as legi legiti tima mate te goal goals. s. "ome "ome rese resear arh h in management ontrol sAstems suggests that if standards are set n., be used to assign Dblame. athe ather, r, theA theA shou should ld be used used osi ositi tiv velA elA to motiva tivatte ont ontin inua uall oer oerat atin ing g imrovements.


13-&



13-44 M#"e&i#l( %#&i#$'e(89u&$#l E$"&ie( (&0 minutes)

tual Purchases at tual +ost (8) x ()

tual Purchases at "tandard +ost (8) x (")

$,300 lbs. x #2lb. K Purchase

(8) x #*.102lb. K rie 'ariane  K

tual Usage at "tandard +ost (8) x (")

Flexible-u -udget mount ("8) x (")

(8) x #*.102lb. K

("8) x #*.102lb. K

!sage 'ariane  K 1. 8uantitA of materials used  (8)  materials urhased - inrease in ending inventorA of materials  $,300 - *00  ,$00 lbs. "tandard MuantitA of diret materials for the units rodued this eriod 

("8) ("8)  &,000 &,000 units units rodue rodued d x  lbs. lbs. er unit  $,00 $,000 0 ounds ounds

6herefore, the diret materials usage variane  (8 7 "8) x "  (,$00 lbs. - $,000 lbs.) x #*.102lb.  )1,>F 6he diret materials purchase rie variane  6otal diret materials variane 7 materials usage variane  #0 ! ; #1,0&0 F  )1,**U


13-!



13-44 (+ontinued)

&. tual ost of diret materials er ound () diret materials purchase rie variane  ( - ") x 8 #1,0  ( - #*.10)2lb. x $,300 lbs.   #*.10 ; #0.&0  )+03@lb0 3. (endix) Journal entries 5aterial ials >nven nventtorA orA ($,3 $,300 lbs lbs. x #*. #*.102l 02lb.) 5aterials urhase rie variane #*.302lb.)

#&, &,330 #1,0 ounts aAable ($,300 lbs. x

#3,990

6o reord urhase of $,300 lbs. of diret materials atual ost er ound  #*.30 standard ost er ound  #*.10. G> >nventorA ($,000 lbs. x #*.102lb.)

(,$00 lbs. x #*.102lb.)

#0,$00 5aterials usage variane #1,0&0 5aterials inventorA #39,$0

6o reord the standard diret materials ost for the &,000 units rodued this eriod.


13-'



13-4*

De"e&7i$i$! S"#$#& Di&e'" M#"e&i#l( C9(" (* minutes) 6otal lbs. of :atura er aCage of ""-&

1& lbs.

"tandard urhase rie er ound of :atura 6otal urhase rie before urhase disount urhase disount (3% x #0.00)


#0.00 1.$0

"tandard diret material ost er aCage of ""-&

2!

x #*.00

13-1

)+5 0>

©The McGraw-Hill Companies,


13-45 Fi$#$'i#l ?e&(u( ?e&(u( O6e&#"i9$#l C9$"&9l Be/#?i9&#l C9$(ie&#"i9$( i$ "/e S"#$#&-Se""i$! P&9'e(( (&0 minutes) s indiated in the text, n essene, essene, suh roedures roedures assess both effectiveness (e.g., did
Blocher, Stout, Cokins, Chen, Cost Chen, Cost Management, 4/e 2!

13-11



13-+ S"#$#& S"#$#& L#b9& R#"e R#"e #$ L#b9& L#b9& Ei'ie$' Ei'ie$' %#&i#$'e %#&i#$'e (10-1* minutes) tu tual al >nu >nuts ts at tual ual +ost ost (8) x ()

tu tual al >nut >nuts s at "tandar ndard d +ost (8) x (")

11,0 11,000 00 hrs. hrs. x #30. #30.00 002h 2hr. r.  #330,000

11,0 11,000 00 hrs. hrs. x (") (")  K #33,000F

1.

Flexi Flexible ble-u -udge dgett mount unt ("8) x (")

Labor Rate 'ariane

1&,0 1&,000 00 hrs. hrs. x (") (")  K K

Labor Efficiency 'ariane 'ariane

6otal atual diret labor hours
11,000

tual hourlA rate ra te

x

#30.00

6otal atual total diret labor ost

#330,000

lus Favorable diret labor rate variane

;

6otal atual diret labor hours at standard hourlA rate 6otal otal atual dire irett lab labo or ho hours
#33,000

÷

"tandard "tandard diret labor rate er hour

33,000 11,000 )330

&. ?iret ?iret labor labor efficiency variane variane  atual hours at standard ost 7 standard labor ost for units rodued  P(8) x (")Q - P("8) x (")Q  P11,000 hrs. x #332hourQ - P1&,000 hrs. x #332hr.Q  )33,F or  (8 - "8) x "  (11,000 - 1&,000) hrs. x #33.002hr.


13-12

 )33,F



13-+>

L#b9& %#&i#$'e( #$ 89u&$#l E$"& (1*-&0 minutes) tual tual >nuts >nuts at tual +ost (8) x () &0, &0,000 000 hrs. rs. x ()  #3$,000

tual tual >nuts >nuts at "tandard +ost (8) x (")

Flexibl Flexible-budg e-budget et mount ("8) x (")

&0, &0,000 hrs. x (" (")  K

("8 ("8) x (" (")  K

#,000!


K Labor Efficiency 'ariane 'ariane

1. "tandard diret labor hourlA rate 6otal aAroll (8 x )

#3$,000

!nfavorable diret labor rate variane

7

?iret labor hours
,000 #3&,000

tual diret labor hours (8)

&0,000

÷

"tan "tanda dard rd dire diret t labo laborr hou hourl rlA A rate rate (") (")

)150*

&. ?iret labor effiienA variane udgeted total diret hours

&,000

udgeted units to manufature "tandard diret labor hours er unit

÷

of outut

$,000 3

6otal units manufatured

x

6otal standard hours for units manufatured

,000 1$,000

?iret labor effiienA variane  (8 - "8) x "  )3,> U

 (&0,000 - 1$,000) hrs. x #1$.02hr. 3. (endix) Journal /ntrA for Labor +ost, JanuarA G> >nventorA (1$,000 hrs. x #1$.0) ?L rate variane ?L effiienA variane Gages aAable (&0,000 x #1$.902hr.)


13-13

#33,$0 #,000 #3,&00 #3$,000



13-+4 L#b9& R#"e #$ Ei'ie$' %#&i#$'e( (&0 minutes) tual >nuts >nuts at tual +ost (8) x ()

tual >nuts >nuts at "tandard +ost (8) x (")

8 x #1$.002hr.  #&0,000

8 x #1.002hr.  K K

Labor ate 'ariane

10,000 x 1.*) x #1.00  #&0,000 K

Labor /ffiienA 'ariane

1. ?ire ?iret t labo laborr rat rate e var varia ian ne e ?ifferene in hourlA 3,U &.

Flexible-udget Flexible-udget mount ("8) x (")

#1$.00 - 1.00 #1$.00

÷

x 11,*00

?iret labor efficiency vari va rian ane e  tual diret labor hours
11,*00 10,0 0,000 x 1.*

?ifferene in diret labor hours (8 - "8) "tandard diret labor hourlA
1*,000 3,*00F x #1.00 )+*,F

>f the unfavorable rate varian variane e is a resul resultt of the the rodu roduti tion on mana manager gerNs Ns deisi deision on to eml emloA oA

#&.00!

*,000F

13-1#



13-+* A66e$ix2: S"#$#& C9("i$! #$ 89u&$#l E$"&ie( (&0 minutes) 5aterials >nventorA (,000 gals. x #10.002gal.) #0,000 urhase rie 'ariane #&,00 ounts aAable (,000 gals. ga ls. x #10.*2gal.) #&,00 6o reord reord,, on oen oen aou aount, nt, diret diret mate materi rials als ,00 ,000 0 gals. gals. R stan standar dard d ost ost of #10.002gal. tual ost er gallon  #10.*. G> >nventorA (&,*00 x & gals. x #102gal.) 5aterials !sage 'ariane (100 gals. x #102gal.) 5aterials >nventorA (*,100 gals. x #102gal.)

#*0,000 #1,000 #*1,000

6o reord the standard diret materials materials ost (#&02unit) (#&02unit) for the omleted omleted rodution of the eriod (&,*00 units rodued). G > >nventorA (&,*00 x & hrs. x #&*2hr.) #1&*,000 Labor ate 'ariane (#*.*02hr. x ,900 hrs.) #&,9*0 Labor /ffiienA 'ariane (100 hrs. x #&*2hr.) #&,*00 G ages aAable (,900 hrs. x #19.*02hr.) #9*,**0 6o reord the standard diret labor ost (#*02unit) of the omleted rodution for the eriod (&,*00 units rodued) and the atual labor osts inurred for the eriod. Finished Toods >nventorA (#0 x &,*00 units) #1*,000 G> >nventorA #1*,000 6o reord the diret manufaturing ost omonent of ost of goods manufatured for the eriod. +T" (#02unit x &,000 units) #10,000 Finished Toods >nventorA #10,000 6o reord the diret manufaturing manufaturing ost omonent omonent of the ost of goods sold (+T") for the eriod. ounts eeivable (#1*02unit ( #1*02unit x &,000 units) #300,000 "ales evenue #300,000 6o reord sales revenue and assoiated aounts reeivable for the eriod.


13-1$



13-+5 13-+5 Di&e'" Di&e'" L#b9& L#b9& %#&i#$' %#&i#$'e( e( (1* minutes) tual >nuts at tual +ost (8) x ()

tual >nuts at "tandard +ost (8) x (")

1$,000 hrs. x  #*0.002hr.

1$,000 hrs. x #*0.002hr. #*0.002hr. K

Flexible-udget Flexible-udget mount ("8) x (") 1,000 hrs. x #


Labor Efficiency 'ariane 'ariane

Flexible-udget 'ariane for ?iret Labor #&0,000F 1.

?iret Labor Efficiency variane

 (8 - "8) x "  (1$,000 - 1,000) hrs. x #*02hr.  )1,U

&.

6otal 6otal Flexi Flexible- ble-udge udgett 'aria 'ariane ne  ate ate variane variane ; /ffi /ffiien ienA A varia variane ne ate ate varia variane ne

 6ot 6otal al vari varian ane e - /ff /ffi iien ienA A vari varian ane e  #&0,000F - #100,000!  )1>,F

3.

tual diret labor hours ( (8)

1$,000

"tandard ard dire diret t labor bor rate ate er hou hour (" (")

x

6otal 6otal atu atual al diret diret labor labor hours hours at the the stand standard ard rate rate ?iret labor rate variane7Favorable


#900, #900,000 000 7

6otal diret labor aAroll in 5aA (8 x )

#*0.00 1&0,000 )5,

13-1%



13-* S"#$#& Di&e'" L#b9& C9(" Pe& U$i" (10 minutes) 6otal hours aid er
0

=ourlA
x

G eeClA
#1,&00

/mloAee benefits (0%)

;

6otal
?iret labor ost er rodutive hour

3* #$

:umber of standard diret labor hours er unit "tandard diret labor ost er unit of outut

2!

$0 #1,$0

GeeClA rodutive hours er emloAee


#3 #30

13-1&

x

3 )144



13-*> S"#$#& C9("( #$ E"/i'( (1* 5inutes) s ontroller of the omanA, 5arANs behavior is not ethial. !nder the Credibility standard, 5arA has an obligation obligation to ommuniate ommuniate information information fairlA and obEetivelA. obEetivelA. Further, under the Credibility standard standard she has a resonsibilitA to reare omlete and lear lear reor reorts ts and reom reomme mend ndat atio ions ns.. 6hat 6hat is, is, she must must disl dislose ose the the rie rie information sine this information ould reasonablA be exeted to influene the on. !nder the Integrity standard, 5arA should avoid this onflit of interest (ersonal loAaltA versus loAaltA to the omanA for

13-1!



PROBLEMS 13-*4 S"#$#& S"#$#& C9(" S("e7(Be/ S("e7(Be/#?i9& #?i9&#l #l C9$(ie&#"i9$( C9$(ie&#"i9$( (30 minutes) 1. a. 6he maE maEor or advanta advantages ges of using using a standa standard rd ost ost sAst sAstem em inlude inlude 







udgeting. "tandard osts an be the building bloCs for budget rearation and allo< the develoment of flexible-budgets. erfor erforman mane e evaluati evaluation. on. +omari +omarisons sons of atual atual osts osts to standar standard d osts osts failit failitate ate evaluat evaluation ion of the erforma erformane ne at the omanA omanA,, deartm deartment ent,, ost enter, or individual level. "tandards also allo< emloAees to more learlA understand f Dinte Dinterna rnaliO liOed ed (i.e. (i.e.,, ae aete ted) d) bA oerat oerating ing erso ersonn nnel, el, the the stand standard ards s an an moti motiva vate te ation ations s that that hel hel the the organi organiOat Oation ion ahie ahieve ve its its strategi obEetives. eordC eordCeei eeing. ng.  standar standard d ost ost system redues reordCeeing osts and fail failiti ities es inven invento torA rA ontr ontrol ol (i.e. (i.e.,, item items s need need be main maintai tained ned in hAs hAsia iall Muantities onlA).

b. 6he disadvantages2 disadvantages2hallenges hallenges that that an result result from from using using a standard standard ost sAstem sAstem inlude the follo






+ost standards that are too tight an ause the emloAees to ignore the stand standard ards, s, or

13-1'



13-*4 (+ontinued) &0  standard ost sAstem must be suorted bA to management to be suessful. =o




"tanda "tandard-se rd-setti tting ng an be a artii artiiativ ative e roess roess
. 6he onseMuenes onseMuenes of having the the standards standards set bA an outside outside onsulting onsulting firm are the follo




6here ould be negative emloAee reation reation as the emloAees emloAees did not artiiate artiiate in the standard-setting roess. 6here ould be dissatisfation if the standards ontain ost elements that are not ontr ontroll ollabl able e bA the the rodu roduti tion on grous grous

13-2



13-** S"#$#& C9(" S/ee" #$ U(e 9 %#&i#$'e D#"# (30-0 minutes) 1.

"tan "tandar dard d ost ost for for eah eah ten-g ten-gal allon lon bat bath h of rasbe rasberrA rrA she sherbe rbet t #2 "tandard 8uantitA ?iret materials asberries 4ther ingredients ?iret labor "orting lending aCaging

b2 "tandard ate

(.* Mts.U

x

#.00)  #30.00

(10 gal.

x

#&.&*) 

&&.*0

(3 min. x  Mts.)20

x

#1*.00 

.*0

(1& min.2 0)

x

#1*.00 

3.00

(0 Mts.UU

x

#0.*0) 

#*&.*0

.*0 &0.00 )50

. "tandard ost er ten-gallon bath

0 UP UP Muar Muarts ts2b 2bat ath h x (;1 (;1)Q )Q2 2  .* .* Mua Muart rts s of in inut uts s reMu reMuir ired ed to to obta obtain in  a ae eta tabl ble e Muarts. UU Muarts er gallon x 10 gallons  0 Muarts. &. a. >n gene genera ral, l, the the ur urha hasi sing ng man manager ager is hel held res reson onsi sibl ble e for for unfavor unfavorable able materi materials als urhase urhase rie rie varianes varianes.. +auses +auses of these these varianes inlude the follo
 

Failure to orretlA foreast rie inreases. urhasing nonstandard materials or in uneonomial lots. 4utdated (i.e., inaroriate) standard. 6ransor 6ransortt of materia materials ls other other than than method method (e.g., (e.g., seond-d seond-daA aA deliverA deliverA)) embodAing in the standard rie. :ot urhasing from suliers offering the most favorable terms. Teneral maro-eonomi fators affeting ries.

>n some situations, ho

13-21



13-** (+ontinued) s a small roduer, +oldVingNs ometitive strategA is liCelA to be differentiation through brand reognition, Eust as the firm has aarentlA been doing. 6he suess of the ometitive strategA reMuires that the firm maintains high MualitA and good ost ontrol. !nfavorable rie varianes derease the rofit of the firm and, unless orreted in the short run, maA omromise the firmNs ometitive osition and the survival of the firm in the long-run. b. >n general, general, the rodut rodution ion manager manager or forema foreman n is held resonsi resonsible ble for unfavorable unfavorable labor effiienA effiienA varianes. +auses of these varianes varianes inlude the follo
oorlA trained labor "ubstandard, ineffiient, or imroerlA set eMuiment >nadeMuate suervision !se of sub-standard material inuts 4utdated standard

!nfavorable !nfavorable effiienA varianes inrease osts, derease rofits, rofits, and maA affet the MualitA of the firmNs roduts. +ontinuous unfavorable effiienA varianes EeoardiOe the ometitive osition of the firm and threaten the suess of the firmNs strategA. N9"e: one N9"e: one issue to raise here is the danger of too muh fous on the labor effiienA variane. For examle, in manA ases todaA, labor is a short-term fixe fixed d ost. ost. 6hus, 6hus, a rini rinial al ause ause of an unfavo unfavorab rable le labor labor effi effiie ienA nA variane is laC of sales orders2rodution orders2rodution demand, not 6 hilosoh hilosohA A that that manA manA organiOati organiOations ons are ursuing ursuing todaA. todaA. 6he moral here is that

13-22



13-*5 Fill-i$ Mi((i$! D#"#: P&9i"-%#&i#$'e Re69&"( (30 5inutes) tu tual al esults udget !nit sales "ales

1,6 !"#,$

'ariable osts 5anufaturing "elling B dmin.

!%(,% #,000

Flexible udg udget et 'ariane :2 #1,00!

"ales Flex Flexib ible le 'olu 'olume me udget

+ontribution margin Fixed osts

!(,% !(,%  !$, !$, ) ) !6,% !1,$'

4erating inome

#1,000

!%,6)

100F !%,&'

1,*00 #3,*00

!1,6) !%)

#&,000 !",

1,6 !$,

!%&,6 #1,00! !#) #3,&00

5aster 5aster ("ta ("tati ti) ) 'ariane

!11,% !(,6

!(' !1,& ** !(,6

#3,00

!('

!%,+

1. a B b tual tual units units sold  5aster 5aster budget budget units ; Favorabl Favorable e sales volume volume varian variane e 1,*00 ; 100 F  1,00 units . udgete udgeted d selling selling rie rie er er unit unit #3,*00 #3,*00 ÷ 1,*00 1,*00  #&* er unit "ales vo volume variane, in te terms of sales re revenue

100 x #&* 

#&,*00F

1,00 1,00 x #&*2 #&*2uni unitt 

#0, #0,000 000

#0,000 - #1,00 ! 

#3$,00

d. "ale "ales s revenu revenue, e, flex flexib ible-b le-budg udget et e. "ales revenue, atual 'ariable manufaturing ost

f. "tand "tandard ard ost ost er unit unit #&,0 #&,000 00 ÷ 1,*00 units  #1 er unit 6otal flexible-budget amount

1,00 units x #1 

#&*,00

#&*,00 - &,000 

#1,00!

#&*,00 ; #1,00 ! 

#&,&00

#,000 - #3,&00 

#$00!

(#3,&0021,00 units) x 1,*00 units 

#3,000

g. "ales volume variane (or, 100 units x #12unit  #1,00!) h. tual amount inurred 'ariable selling and administrative exense i. Flexible-budget variane E.

5aster-budget amount


13-23



13-*5 (+ontinued) C. "ales volume variane, in terms of "B

#3,&00 - #3,000 

#&00!

(e) #3$,00 - (h) #&,&00 - #,000 

#,&00

+ontribution margin l. tual amount m Flexible-budget variane

#1,00 ! ; #1,00 ! ; (i) #$ #$00 !  #,000!

n. Flexible-budget amount

(d) # #0,000 - (f) #& #&*,00 - #3,&00 

or,

(l) #,&00 ; (m) #,000 ! 

#11,&00 #11,&00

. "ales volume variane

#&,*00 F - #1,00 ! - #&00 ! 

#00F

M. 5aste ster-bu r-bud dget amount

#3,* ,*00 - &,000 - (E) 3,000 

#10,* 0,*00

or, (n) #11,&00 - () #00 F 

#10,*00

(l) #,&00 - #1,000 

#,&00

(n) #11,&00 -#3,00 

#,00

"ame as (s)

#,00

u. Fixed ost flexible-budget variane

(r) #,&00 - (s) #,00 

#1,00F

v. Fixed ost sales volume variane

(s) #,00 - (t) #,00 

-0-

r. Fixed ost, atual s. Fixed ost, flexible budget t. Fixed ost, master (stati) budget

<. 4erating 4erating inome flexible-budget flexible-budget variane x. 4erating inome, master budget

#1,000 - #3,00 

#&,00! #&,00!

(M) #10,*00 - (t) #,00 

#&,900

A. "ales "ales volume volume varian variane, e, in terms terms of oera oeratin ting g inome inome  #3,00 - #&,900  #00F or, #00 - #0  #00F r ie er unit (e) #3$,00 ÷ (b) 1,00 units  )>40 2" tual selling rie


13-2#



13- Fill i$ Mi((i$! D#"# (&* minutes) 1. !nit sales "ales 'ariable osts +ontribution margin

tual esul esults ts 1,&00 #9,00 !&6,# !1%,#

Flexibleudget 'arian 'ariane e ** !%,$) !#,#) #11,&00!

!(, #*,$00

!%,) !1",%)

Fixed osts 4erating inome

Flexible Flexible udge udgett 1,% !(%, !$#, !%$,

"ales 'olume 'aria 'ariane ne %' !1%,' !#,) !$,'

5aster ("tati) ("tati) udg udget et 1,000 #0,000 #0,000 !%,

!&, !1+,

** !$,'

#*,000 !1&,

a. - 0 b. 1,&0 1,&00 0 (bA (bA defini definiti tion) on) . 1,&0 1,&00 0 - 1,00 1,000 0  &00F &00F d. udgete udgeted d selling selling rie rie er unit unit #0,00 #0,000 0 ÷ 1,000 units  #02unit ∴

Flexible-budget revenues  1,&00 units x #02unit  #&,000

e. #9, #9,00 00 - #&, #&,00 000 0  #&,0 #&,00! 0! f. #&, #&,00 000 0 - #0, #0,00 000 0  #1&, #1&,00 000F 0F g. "tanda "tandard rd (budgete (budgeted) d) variable variable ost ost er unit unit #0,00 #0,000 0 ÷ 1,000 units  #02unit

∴

Flexible-budget variable ost 1,&00 units x #0  #$,000 h. #$,0 #$,000 00 - #0, #0,00 000 0  #$,00 #$,000! 0! i. #11,& #11,&00! 00! - (e) (e) #&, #&,00 00! !  #$,$ #$,$00! 00! E. (g) #$,000 ; (i) #$,$00  #*,$00 C. #9, #9,00 00 - (E) (E) #*,$ #*,$00 00  #1&, #1&,$00 $00 l

#1&,$00 ; #11,&00  #&,000 or, #&,000 - #$,000  #&,000

m #1&,000F - #$,000!  #,000F, or, udgeted ontribution margin er unit

#02unit - #02unit  #&02unit &00 units x #&02unit  #,000F n. #0,000 - #0,000  #&0,000 or, 1,000 units x #&02unit #&02unit  #&0,000 #&0,000 . #1&,$ #1&,$00 00 7 #*, #*,$00 $00  #,0 #,000 00 M. - 0 - (bA definition, definition, as long long as both both outut levels are
13-2$



13- (+ontinued) s. #,00 #,000 0 () - #*, #*,000 000 (r) (r)  #&,0 #&,000! 00! t. #&0,0 #&0,000 00 (n) (n) - #*, #*,000 000  #1* #1*,0 ,000 00 u. #,00 #,000F 0F (m) (m) -#0 -#0 (M) (M)  #,0 #,000F 00F v #1*,000 (t) ; #,000 (u)  #19,000, or, #&,000 (l) - #*,000 (r)  #19,000 - #*,$00 - #19,000 (v)  #13,&00!, or, #11,&00! ; #&,000! (s)  #13,&00!


13-2%



13-> Di&e'" L#b9& L#b9& %#&i#$'e( %#&i#$'e(:: ;9&
tu tual al Labo Laborr +ost +ost (8) (8 ) x () ( )

tual 8uantitA at "tan "tanda dard rd ri rie e (8) x (") (" )

Fl Flexible udget (F) ase ased d on 4ut 4utut uts s ("8) ("8 ) x (")

tual =rs. x "td. .orked x Gage ate2=r.

"td. =rs. llo-ed x x "td. Gage ate2=r. ate2=r.

tual =rs. GorCed x tual Gage ate2=r. ate2=r. (1.1 (1.1 x "8) x () () K

(1.1 (1.1 x "8) x #302hr. #302hr. K

Labor Rate 'ariane )11,*F

("8) ("8) x #302hr. #302hr. K

Labor Efficiency 'ariane 'ariane )>4,U

1. /ffii /ffiienA enA variane variane  (8 - "8) x " " #&,000  (1.1 "8 - "8) x #302hr. 0.1 "8  $00 "8  +, /9u&(

∴

&.

8  1.1 1.1 "8  1.1 1.1 x *,000 *,000 hrs. hrs.  +,5 /9u&(

3.

Labor Labor rate rate variane variane  ( - ") ") x 8 - #11,00  ( - #30.00)2hr. x *,$00 hrs.  - #30.00  - #&.00   )>50@/&0

∴

. "8  :umber :umber of units units manufatured manufatured x "tandard "tandard labor hours er er unit *,000  :umber of units manufatured x & hrs.2unit ∴

:umber of units manufatured  *,000hrs.2&hrs.er unit  >,+ u$i"(


13-2&



13-4 Re?i(i9$ 9 S"#$#&( (30 minutes) 1. a. evising evising the standards standards immedia immediatelA telA F 6otal hanges in er unit ost due to use of ne< materials  )104F







b. +hanges +hanges in er unit unit ost due due to the ne< ne< labor labor ontrat ontrat  (:e<

13-2!

)04F



13-* Di&e'" M#"e&i#l(: M#"e&i#l(: 89i$" 89i$" P&i'e-u#$" P&i'e-u#$"i" i" %#&i#$'e %#&i#$'e (&* minutes) 1. ?ire ?iret t mat mater eria ials ls price variane  8 x ( - ")  &*,000 tons x (#1& - #10)2ton

)+,U

&. "tandard "tandard diret materia materials ls allo
)>+,U

3. Dure Dure diret diret materia materials ls rie rie variane variane  "8 x ( ( - ")  (#1& - #10)2ton x &&,*00 tons 

#*,000!

?iret materials Eoint rie-MuantitA rie-Muan titA variane  ( - ") x (8 7 "8)  (#1& - #10)2ton x (&*,000 - &&,*00) tons 

; )+,U

6otal diret materials rie variane (as determined in ratie)  8 x ( 7 ") 

#*0,000!

6he reeding alulations are illustrated grahiallA belo<


13-2'



13-* (ontinued)

/ S. 4 20/ - S/3

0/ - S/ 4 0. - S.5

0/ S/ 3 . S - . 0 2 4 / S

. S.

0.

Le!e$:   atual rie er ton of ra< material "  standard rie er ton of ra< material 8  atual tons of ra< material used in rodution "8  standard X of tons tons allo

13-3



13-5 P&9i"-%#&i#$'e A$#l(i( (0 - * minutes) 1.

!nit sales "ales 'ariable +osts 5anufaturing 5a 5arCeting 6otal 'ariable +osts Fixed +osts 5a 5anufaturing 5a 5arCeting 6otal Fixed +osts 4erating >nome

tual tual esul esults ts ,000 #390,000

Flexible udget udget 'aria 'ariane nes s 0 #10,000!

"ales Flexibl Flexible e 'olume 'olume udge udgett 'aria 'ariane ne ,000 100F #00,000 #10,000F

5aster ("tati ("tati) ) udg udget et 3,900 #3 #390,000

#&1,000 #39,000 #&$0,000

#1,000! #1,000 F #0,000 !

#&00,000 #0,000 #&0,000

#*,000! #1,000 ! #,000 !

#19*,000 #39,000 #&3,000

#*0,000 #0,000 #90,000 #&0,000

#0 #,000! #,000! #*,000 !

#*0,000 #3,000 #$,000 #,000

#0 #0 #0 #,000 F

#*0,000 #3,000 #$,000 #0,000

6otal 5aster ("tati) udget 'ariane #*0,000! Flexible-udget 'ariane #*,000!

"ales 'olume 'ariane #,000F

&. rofit-variane omonents a. total master (stati) budget variane  atual oerating inome - master budget oerating inome  #&0,000 - #0,000  )+,U b. total flexible-budget variane  atual oerating inome - flexible-budg flexible-budget et oerating inome  #&0,000 - #,000  )+4,U . total variable ost flexible-budget flexible-budge t variane variane  atual total variable osts 7 flexible-budget total variable osts  #&$0,000 - #&0,000  )4,U 1. flexible-budget variane for variable manufaturing osts  atual variable manufaturing osts - flexible budget for variable manufaturing osts  #&1,000 - #&00,000  )41,U


13-31



13-5 (+ontinued-1) 13-5 (+ontinued-1) &. flexible-budget variane for variable nonmanufaturing osts  atual variable nonmanufaturing osts - flexible-budget variable nonmanufaturing osts  #39,000 - #0,000  )1,U d. total fixed ost flexible-budget variane  atual total fixed fixed osts - flexiblebudget total fixed osts  #90,000 - #$,000  #,000! 1. flexible-budget variane for fixed fixed manufaturing manufaturing osts  atual fixed manufaturing osts - flexible-budget for fixed manufaturing osts  #*0,000 - #*0,000  ) &. flexible-budget variane for fixed nonmanufaturing osts  atual fixed nonmanufaturing osts - flexible-budget for fixed nonmanufaturing osts  #0,000 - #3,000  )4,U 3. >nterretation of rofit varianes a. total master 0static budget variance  this is the total oerating rofit variane for the eriod, i.e., the differene bet

13-32



13-5 (+ontinued-&) 13-5 (+ontinued-&) 1. fle2ible fle2ible*bud *budget get varianc variance e for total total variable variable manufact manufacturin uring g costs costs  this varia variane ne reres reresent ents s the the orti ortion on of the the flex flexib ible-b le-bud udget get varian variane e that that is attri attribut butabl able e to varia variabl ble e manu manufa fat turi uring ng ost ost er er unit unit being being diffe differen rentt from from budge budgete ted d amou amount nt.. s suh, suh, it an be furt further her deom deomo osed sed into into a total total variane for diret materials, a total variane for diret labor, and a total variane for variable overhead (+hater 1). fle2ible*budget variance for total variable nonmanufacturing nonmanufacturing costs  this &. fle2ible*budget varia variane ne reres reresent ents s the the orti ortion on of the the flex flexib ible-b le-bud udget get varian variane e that that is attributable to nonmanufaturing ost er unit being different from budgeted amount. amount. s suh, it an be further deomosed deomosed into a total variane for eah nonmanufaturing ost element (e.g., selling exenses).

d. fle2ible*budget variance for total fi2ed costs  this variane is also referred to as a sending variane, sine it reresents the differene bet

13-33



13-5 C9$"i$ue-32 4rtiO B +o. 5aster ("tati) udget 'ariane (tual 4erating rofit - 5aster udget 4erating rofit) )+,U

F-'ariane )+4,U (#&0,000 - #,000)

" 'ariane )1,U

"ales 'olume 'ariane )4,F (#02unit x 100 units)

'ariable +ost 'arianes )4,U

5anufaturing )41,U

Fixed +ost 'arianes )4,U

5arCeting )1,F


13-3#

5anufaturing )

5arCeting )4,U



13-$ (+ontinued-) N9"e "9 S"ue$" S"ue$"  n /xel file solution overing arts (1) and (&) of this assignment is embedded belo<. @ou an oen this DobEet bA doing the follo
5aster udget ?ata "ales volume (units) 

3,900


13-$ (+ontinued-) N9"e "9 S"ue$" S"ue$"  n /xel file solution overing arts (1) and (&) of this assignment is embedded belo<. @ou an oen this DobEet bA doing the follo
5aster udget ?ata "ales volume (units)  "elling ri-e er unit  'aria riable manufa-t fa-tu urin ring -os -osts2un 2unit  'ariable selling -ost (% of sales)  Fixed manufa-turing -osts 

3,900 #100.00 #*0 #*0.00 .00 0.10 #*0,000


13-3$



13-5 DM #$ DM ?#&i#$'e(, (9l?i$! u$<$9=$( (0 minutes) ?iret 5aterials 8 x " 8 x  8 x #*  #13,*00 K urhase rie variane #,*00 ! 8 x " 8 8 x #*  K

"8 x " (P,*00 x Q x #*)  #13*,000 !sage variane #*,000 !

?iret Labor 8 x 

8 x " 8 x #30

K

 K

"8 x " (P,*00 x &23Q x

#30) ate variane

 K /ffiienA variane

#,&00 !

#,000 F

1. 6otal standard diret labor ost for the anels manufatured ,*00 units x &23 hour er unit x #30 er hour  )., &. 6otal diret labor hours ,5 /9u&( 3. tual diret labor hourlA , lb(0 *. 6otal ounds of diret materials materials used, 8  total ounds used, at standard ost ÷ standard ost er ound  P(&,000 lbs. x #*) ; #*,000Q ÷ #*2lb.  #10,000 ÷ #*2lb.  >5, lb(0 . 6otal ounds of diret materials materials urhased, 8  total ounds urhased, at std. ost ÷ standard ost2lb.  (#13,*00 - #,*00) ÷ #*2lb.  >*, lb(0 . tual diret materials materials rie er ound  atual ost of urhases ÷ number of ounds urhased  #13,*00 ÷ &,000  )+0>+@lb0


13-3%


Student Sol13 4e

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