Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 15, Problem 9E
Exercise 8-9A Responsibility for the fixed cost volume variance
Roanoke Company expected to sell 400,000 of its pagers during 2018. It set the standard sales price for the pager at $60 each. During June, it became obvious that the company would be unable to attain the expected volume of sales. Roanoke’s chief competitor, Kenny Corporation, had lowered prices and was pulling market share from Roanoke. To be competitive, Roanoke matched Kenny’s price, lowering its sales price to $56 per pager. Kenny responded by lowering its price even further to $48 per pager. In an emergency meeting of key personnel, Roanoke’s accountant, Karen Velez, stated, “Our cost structure simply won’t support a sales price in the $48 range.” The production manager, Gene Cormier, said, “I don’t understand why I’m here. The only unfavorable variance on my report is a fixed
Required
- a. Describe a scenario in which the production manager is responsible for the fixed cost volume variance.
- b. Describe a scenario in which the marketing manager is responsible for the fixed cost volume variance.
- c. Explain how a decline in sales volume would affect Roanoke’s ability to lower its sales price.
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Revenue variances
Lowell Manufacturing Inc. has a normal selling price of $20 per unit and has been selling 125,000 units per month. In November, Lowell Manufacturing
decided to lower its price to $19 per unit expecting it can increase the units sold by 16%.
a. Compute the normal revenue with a $20 selling price.
b. Compute the planned revenue with a $19 selling price.
c. Compute the actual revenue for November, assuming 135,000 units were sold in November at $19 per unit.
d. Compute the revenue price variance, assuming 135,000 units were sold in November at $19 per unit.
e. Compute the revenue volume variance, assuming 135,000 units were sold in November at $19 per unit.
f. Analyze and interpret the lowering of the price to $19.
Decreasing the selling price to $19 did
total revenue, but it did not
the revenues by 16% as planned.
Revenue variances
Lowell Manufacturing Inc. has a normal selling price of $20 per unit and has been selling 125,000 units per month. In November, Lowell Manufacturing decided to lower its price to $19 per unit expecting it can increase the units sold by 16%.
a. Compute the normal revenue with a $20 selling price.
b. Compute the planned revenue with a $19 selling price.
c. Compute the actual revenue for November, assuming 135,000 units were sold in November at $19 per unit.
d. Compute the revenue price variance, assuming 135,000 units were sold in November at $19 per unit.
e. Compute the revenue volume variance, assuming 135,000 units were sold in November at $19 per unit.
f. Analyze and interpret the lowering of the price to $19.
Decreasing the selling price to $19 did
v total revenue, but it did not
v the revenues by 16% as planned.
Problem 10: Factory Overhead Variance
The following are the standard cost data of Paul Corporation for the month of
January 2020:
a. Each unit of chair requires 0.50 hours of labor time to produce.
b. Variable FOH is applied at the rate of P10 per labor hour.
c. Fixed FOH is applied at the rate of P5 per labor hour, based on expected
annual capacity of 25,000 hours.
Actual Production data:
Number of chairs produced
Actual number of labor hours
Variable FOH cost incurred
Fixed FOH cost incurred
52,000 units
26,500 hours
P270,000
P140,000
Required: Compute the following:
1. Calculate the variances using 1 way approach
2. Calculate the variances using 2 way approaches
3. Calculate the variances using 3 way approaches
4. Calculate the variances using 4 way approaches
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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