Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 20P
a)
To determine
Prepare a pro forma income statement
b)
To determine
Prepare flexible
c)
To determine
Determine the variable and sales cost volume variance with volume of 31,000 units.
d)
To determine
Identify whether the variances are unfavourable or favourable
e)
To determine
Mention how Company N can use the variance to assess the performance
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Question I – Variances
LAR Chemical Company manufactures a wide variety of chemical compounds and liquids for industrial uses. The standard mix for November’s production of 40,000 litres of Product “A” and the budgeted costs for that mix, are as follows:
Liquid Chemical
Quantity (in litres)
Cost (per litre)
Total Cost
Maxan Xulon Cralyn
8,000
24,000
18,000
$2.00
$.75
$1.00
$16,000 18,000
18,000
The actual quantities of direct materials and the cost of the materials placed in production during November to product Product “A” were as follows (all materials purchased were used):
Liquid Chemical
Quantity (in litres)
Total Cost
Maxan Xulon Cralyn
8,480
25,200
18,520
52,200
$17,384 17,640
16,686
$51,710
A total of 40,000 good litres of Product “A” were produced during November.
REQUIRED:
Calculate the direct materials efficiency, mix, and yield variances for each raw material.
QUESTION TWo
The Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costing
system for internal management purposes. The year-end external reports are converted to absorption
costs. Variances are charged to the cost of goods sold.
The following data refers to the years ended 31 December 2020 and 2021:
2020
Sales price per unit
Standard marginal cost per unit:
Direct materials
Direct Labour
Marginal factory overheads
Marginal selling and administrative expenses
Fixed factory overheads
K
80
21
19
8
2
2021
K
90
23
22
10
3
180,000
Units
170,000
Units
Opening inventory
1,500
Closing inventory
2,000
Sales
20,000
The normal volume used for the purpose of absorption costing is 28,000s units in both years.
REQUIRED:
(a) Prepare profit and loss accounts for the year-ended 31 December 2021 on a marginal costing
and on an absorption costing basis.
(b) Discuss any differences which you may find between these two profit and loss acconts.
(c) State what advantages and…
Exercise 8-11A (Algo) Determining materials price and usage variances LO 8-6
Monique's Florals produced a special Mother's Day arrangement that included eight roses. The standard and actual costs of the roses
used in each arrangement follow:
Average number of roses per arrangement
Price per rose
Standard
8.10
x $ 0.40
$ 3.24
Actual
8.40
x $ 0.35
$ 2.94
Cost of roses per arrangement
Monique's Florals planned to make 755 arrangements but actually made 800.
Required
a. Determine the total flexible budget materials variance and indicate whether it is favorable (F) or unfavorable (U).
b. Determine the materials price variance and indicate whether it is favorable (F) or unfavorable (U).
c. Determine the materials usage variance and indicate whether it is favorable (F) or unfavorable (U).
d. Confirm the accuracy of Requirements a, b, and c by showing that the sum of the price and usage variances equals the total
variance.
Complete this question by entering your answers in the tabs below.
Req…
Chapter 15 Solutions
Survey Of Accounting
Ch. 15 - 1. Pam Kelly says she has no faith in budgets. Her...Ch. 15 - 7. What is a responsibility center?Ch. 15 - Prob. 3QCh. 15 - Prob. 4QCh. 15 - Prob. 5QCh. 15 - 3. When are sales and cost variances favorable and...Ch. 15 - 4. Joan Mason, the marketing manager for a large...Ch. 15 - Prob. 8QCh. 15 - Prob. 9QCh. 15 - Prob. 10Q
Ch. 15 - Prob. 11QCh. 15 - 9. Minnie Divers, the manager of the marketing...Ch. 15 - 6. How do responsibility reports promote the...Ch. 15 - Prob. 14QCh. 15 - Prob. 15QCh. 15 - Prob. 16QCh. 15 - 12. How can a residual income approach to...Ch. 15 - Prob. 18QCh. 15 - Exercise 9-6A Evaluating a profit center Helen...Ch. 15 - Prob. 2ECh. 15 - Prob. 3ECh. 15 - Prob. 4ECh. 15 - Exercise 8-3A Determining amount and type...Ch. 15 - Prob. 6ECh. 15 - Exercise 8-4A Determining sales and variable cost...Ch. 15 - Exercise 8-5A Determining flexible budget...Ch. 15 - Exercise 8-9A Responsibility for the fixed cost...Ch. 15 - Prob. 10ECh. 15 - Exercise 8-7A Evaluating a decision to increase...Ch. 15 - Prob. 12ECh. 15 - Prob. 13ECh. 15 - Exercise 9-9A Residual income Climax Corporation...Ch. 15 - Residual income Gletchen Cough Drops operates two...Ch. 15 - Prob. 16ECh. 15 - Prob. 17ECh. 15 - Prob. 18PCh. 15 - Prob. 19PCh. 15 - Prob. 20PCh. 15 - Prob. 21PCh. 15 - Problem 9-20A Return on investment Sorrento...Ch. 15 - Problem 9-21A Comparing return on investment and...Ch. 15 - Comparing return on investment and residual income...Ch. 15 - ATC 8-1 Business Applications Case Static versus...Ch. 15 - Prob. 2ATCCh. 15 - Prob. 3ATCCh. 15 - ATC 9-1 Business Applications Case Analyzing...Ch. 15 - Prob. 5ATC
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- Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 70,000 units of product were as follows: Standard Costs Actual Costs Direct materials 182,000 lbs. at $5.40 180,200 lbs. at $5.30 Direct labor 17,500 hrs. at $16.40 17,900 hrs. at $16.60 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 18,260 direct labor hrs.: Variable cost, $2.90 $50,240 variable cost Fixed cost, $4.60 $83,996 fixed cost Each unit requires 0.25 hour of direct labor. Required: a. Determine the direct materials price varlance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Materials Price Variance Direct Materials Quantity Variance Total…arrow_forwardInformation concerning Johnston Company's direct materials costs is as follows: Standard price per pound $ 6.75 Actual quantity purchased 2,960 pounds Actual quantity used in production 2,860 pounds Units of product manufactured 730 Materials purchase-price variance–favorable $ 885 Budget data for the period: Units to manufacture 1,030 Units of direct materials 4,120 pounds The actual purchase price per pound of direct materials was: Multiple Choice $7.43. $6.45. $6.42. $7.05. $6.80.arrow_forwardCalculation of materials and labor variances Fritz Corp. manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows: The charges to the manufacturing department for November, when 5,000 units were produced, follow: The Purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 lb were purchased at a price of $2.90 per pound. Required: Calculate the following from standard costs for the data given, using the formulas on pages 421–422 and 424: Materials quantity variance. Materials purchase price variance (at time of purchase). Labor efficiency variance. Labor rate variance. Give some reasons as to why both the materials quantity variance and labor efficiency variance might be unfavorable.arrow_forward
- Calculating factory overhead: two variances Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are 2.50 and 1.50 per direct labor hour, respectively. Cost and production data for May follow: a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. c. Was the total factory overhead under- or overapplied? By what amount?arrow_forward(Appendix) Calculating factory overhead: four variances Atlanta Adhesives Inc. budgets 15,000 direct labor hours for the year. The total overhead budget is expected to amount to 42,000. The standard cost for a unit of the companys product estimates the variable overhead as follows: The actual data for the period follow: Using the four-variance method, calculate the overhead variances. (Hint: First compute the budgeted fixed overhead rate.)arrow_forward(Appendix) Overhead variances—four variance Mobile Manufacturing Inc. manufactures a small electric motor that is a replacement part for the more popular gas furnaces. The standard cost card shows the product requirements as follows: Factory overhead rates are based on normal 100% capacity and the following flexible budgets: The company produced 3,500 units, using 18,375 direct labor hours and incurring the following overhead costs: Required: Calculate the factory overhead: variable-spending, variable-efficiency, fixed-spending, and production-volume variances. Does the net variance represent under- or overapplied factory overhead?arrow_forward
- Refer to Exercise 9.17. Chypre, Inc., purchased the amount used of each direct material input on May 2 for the following actual prices: solvent mix for 5.20 per gallon, and aromatic compound for 8,010 per gallon. Required: 1. Compute and journalize the direct materials price variances. 2. Compute and journalize the direct materials usage variances. 3. Offer some possible reasons for why the variances occurred. Chypre, Inc., produces a cologne mist using a solvent mix (water and pure alcohol) and aromatic compounds (the scent base) that it sells to other companies for bottling and sale to consumers. Chypre developed the following standard cost sheet: On May 2, Chypre produced a batch of 1,000 gallons with the following actual results: Required: 1. Calculate the yield ratio. 2. Calculate the standard cost per unit of the yield. (Round to the nearest cent.) 3. Calculate the direct materials yield variance. (Round to the nearest cent.) 4. Calculate the direct materials mix variance. (Round to the nearest cent.)arrow_forwardComputing materials variances D-List Calendar Co. specializes in manufacturing calendars that depict obscure comedians. The company uses a standard cost system to control its costs. During one month of operations, the direct materials costs and the quantities of paper used showed the following: Calculate the following: 1. Total cost of purchases for the month 2. Materials purchase price variance 3. Materials quantity variance 4. Net materials variancearrow_forwardCalculating factory overhead: two variances Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are 10 and 5 per unit, respectively. Cost and production data for June follow: a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. c. Was the total factory overhead under- or overapplied? By what amount?arrow_forward
- Use the following standard cost card for 1 gallon of ice cream to answer the questions. Actual direct costs incurred to make 50 gallons of ice cream: 275 quarts of cream at $1.05 per quart 832 ounces of sugar at $0.075 per ounce 165 minutes of labor at $37 per hour All material used was bought during the current period. A. Compute the material and labor variances. B. Comment on the results and possible causes of the variances.arrow_forwardRefer to Exercise 8.27. At the end of the year, Meliore, Inc., actually produced 310,000 units of the standard model and 115,000 of the deluxe model. The actual overhead costs incurred were: Required: Prepare a performance report for the period. In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Required: 1. Prepare an overhead budget for the expected activity level for the coming year. 2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products) and a budget for production that is 20 percent lower than expected.arrow_forwardActual quantity of direct materials purchased Standard price of direct materials Material price variance Material quantity variance The actual price per pound of direct materials purchased in June was: Multiple Choice O O O $4.10 per pound $4.15 per pound $3.85 per pound 25,000 pounds $ 4.00 per pound $ 2,500 Unfavorable $1,000 Favorablearrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY