Loose Leaf for Fundamental Accounting Principles
Loose Leaf for Fundamental Accounting Principles
23rd Edition
ISBN: 9781259687709
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 23, Problem 8E
To determine

Variance:

Variance is the difference between the actual cost and budgeted cost for particular level of activity. It is computed by deducting the budgeted cost from the actual cost of the production.

Direct Material Cost Variance:

The difference between the actual cost incurred on the direct material and the budgeted cost expected to be incurred is called the direct material cost variance. It can either calculated by deducting the budgeted cost from the actual cost or adding the direct material price variance and direct material quantity variance.

Direct Labor Cost Variance:

The variance between the actual labor cost incurred and the budgeted labor cost is termed as direct labor cost variance. It can be computed by deducting the budgeted labor cost from the actual cost. On the contrary, it can also be ascertained by adding the direct labor rate variance and direct labor efficiency variance.

Overhead Cost Variance:

The difference between the Actual overhead cost incurred on a production or sale and the budgeted or expected overhead cost is termed as the overhead cost variance.

To determine:

1. Computation of standard cost per unit.

2. Compute the total cost variance of June.

Expert Solution & Answer
Check Mark

Answer to Problem 8E

Solution:

1. Standard Cost per unit

  Standard Standard cost per unit
Direct material 6 lbs. @ $8 per lb. $48.00
Direct labor 2 hrs. @ 16 per hr. $32.00
Overhead 2 hrs. @ $12 per hr. $24.00
Total Standard Cost per unit   $104.00

2. Total Cost Variance of June

  Variance
Direct Material Cost Variance $8,850 U
Direct LaboCost Variance $3,050 U
Overhead Cost Variance $6,000 U
Total Cost Variance $17,900 U

Explanation of Solution

Explanation:

1. Computation of Standard Cost per unit

Direct material = Standard pounds allowed per unit X Standard price per pound                         = 6 pounds X $8 per pound                         = $48 per unit Direct labor = Standard Hours allowed per unit X Standard rate per hour                       = 2 hours X $16 per hour                       = $32 per unit Overhead = Standard Hours allowed per unit X Standard rate per hour                  = 2 hours X $12 per hour                  = $24 per unit

2. Computation of Cost Variance

Direct Material Cost Variance

Direct Material Cost Variance = Actual Cost  Standard Cost                                                = $392,850  $384,000                                                = $8,850Unfavorable *Actual Cost = Actual Quantity X Actual Price                      = 48,500 lbs. X $8.10                      = $392,850 *Standard Cost = Standard Quantity X Standard Price                          = 48,000 lbs. X $8.00                          = $384,000*Standard Quantity = Standard pounds allowed per unit X Units manufactured                                = 6 lbs. per unit X 8,000units                                = 48,000 lbs.

Direct Labor Cost Variance

Direct Labor Cost Variance = Actual Cost  Standard Cost                                            = $259,050  $256,000                                            = $3,050 Unfavorable *Actual Cost = Actual Hours X Actual Rate                     = 15,700 hours X $16.50                     = $259,050 *Standard Cost = Standard Hours X Standard Rate                        = 16,000 hours X $16.00                        = $256,000 *Standard Hours = Standard hours allowed per unit X Units Manufactured                           = 2 hours per unit X 8,000 units                           = 16,000 hours                           

Overhead Cost Variance

Overhead Cost Variance = Actual Cost  Standard Cost                                       = $198,000  $192,000                                       = $6,000 Unfavorable *Actual Cost = $198,000 *Standard Cost = Standard Hours X Standard Rate                         = 16,000 hours X $12                         = $192,000 *Standard Hours = Standard hour allowed per unit X Units Manufactured                           = 2 hours per unit X 8,000 units                           = $16,000

Conclusion

Conclusion:

Total standard cost per units is $104

The total cost variance is $ 17,900 Unfavorable

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Chapter 23 Solutions

Loose Leaf for Fundamental Accounting Principles

Ch. 23 - Prob. 11DQCh. 23 - Prob. 12DQCh. 23 - Prob. 13DQCh. 23 - How can the manager of advertising sales at Google...Ch. 23 - Prob. 15DQCh. 23 - Prob. 16DQCh. 23 - Prob. 17DQCh. 23 - Prob. 18DQCh. 23 - Prob. 1QSCh. 23 - Prob. 2QSCh. 23 - Prob. 3QSCh. 23 - Prob. 4QSCh. 23 - Prob. 5QSCh. 23 - Prob. 6QSCh. 23 - Prob. 7QSCh. 23 - Prob. 8QSCh. 23 - Prob. 9QSCh. 23 - Prob. 10QSCh. 23 - Prob. 11QSCh. 23 - QS 23-12 Labor cost variances P2 Frontera...Ch. 23 - Prob. 13QSCh. 23 - Prob. 14QSCh. 23 - Volume variance P3 Refer to information in QS...Ch. 23 - Prob. 16QSCh. 23 - Preparing overhead entries P5 Refer to the...Ch. 23 - Prob. 18QSCh. 23 - Prob. 19QSCh. 23 - Prob. 20QSCh. 23 - Prob. 21QSCh. 23 - Prob. 22QSCh. 23 - Prob. 23QSCh. 23 - Prob. 1ECh. 23 - Prob. 2ECh. 23 - Prob. 3ECh. 23 - Exercise 23-4 Preparing a flexible budget...Ch. 23 - Prob. 5ECh. 23 - Prob. 6ECh. 23 - Exercise 23-7 Cost variances C2 Presented below...Ch. 23 - Prob. 8ECh. 23 - Prob. 9ECh. 23 - Prob. 10ECh. 23 - Prob. 11ECh. 23 - Prob. 12ECh. 23 - Prob. 13ECh. 23 - Prob. 14ECh. 23 - Prob. 15ECh. 23 - Prob. 16ECh. 23 - Prob. 17ECh. 23 - Exercise 23-18A Computation and interpretation...Ch. 23 - Prob. 19ECh. 23 - Prob. 20ECh. 23 - Prob. 21ECh. 23 - Prob. 22ECh. 23 - Prob. 23ECh. 23 - Prob. 1APSACh. 23 - Prob. 2APSACh. 23 - Prob. 3APSACh. 23 - Prob. 4APSACh. 23 - Prob. 5APSACh. 23 - Prob. 6APSACh. 23 - Prob. 1BPSBCh. 23 - Prob. 2BPSBCh. 23 - Problem 23-3B Flexible budget preparation;...Ch. 23 - Prob. 4BPSBCh. 23 - Prob. 5BPSBCh. 23 - Prob. 6BPSBCh. 23 - Prob. 23SPCh. 23 - Analysis of flexible budgets and standard costs...Ch. 23 - Prob. 2BTNCh. 23 - Selling materials, labor, and overhead standards...Ch. 23 - Prob. 4BTNCh. 23 - Prob. 5BTNCh. 23 - Prob. 6BTNCh. 23 - Prob. 7BTNCh. 23 - Prob. 8BTNCh. 23 - BIN 23-9 Access the annual report of Samsung (at...
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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