MANAGERIAL ACCOUNTING FUND. W/CONNECT
MANAGERIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259688713
Author: Wild
Publisher: MCG
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Chapter 8, Problem 4PSA

1.

To determine

The direct materials cost variance, price variance, and quantity variance.

1.

Expert Solution
Check Mark

Explanation of Solution

Given,
The actual material used is 1,615,000 lbs.
The standard quantity of materials for actual production is 1,620,000 lbs.
The actual price is $4.10 per lb.
The standard price is $4.00 per lb.

Calculation of direct material cost variance:

Particulars Amount ($)
Actual units at actual cost ( 1,615,000×$4.10 ) 6,621,500
Standard units at standard cost ( 1,620,000×$4.00 ) 6,480,000
Direct material cost variance 141,500 (unfavorable)
Table(1)

The direct material cost variance is $141,500 (unfavorable).

Calculation of direct material price variance,

The formula to calculate the direct material price variance is,

   Directmaterialpricevariance=[ Actualquantity ×( ActualpriceStandardprice ) ]

Substitute 1,615,000 lb. for the actual quantity, $4.10 for the actual price and $4 for the standard price in the above formula.

   Directmaterialpricevariance=1,615,000lb×( $4.10$4.00 )perlb =1,615,000lb×( $0.10 )perlb =$161,500U

The direct material price variance is $161,500 (unfavorable).

Calculation of direct material quantity variance:

The formula to calculate the direct material quantity variance is,

   Directmaterialquantityvariance=[ ( ActualquantityStandardquantity ) ×Standardprice ]

Substitute 1,615,000 lb for the actual quantity, 1,620,000 lb for standard quantity and $4.00 for the standard price in the above formula.

   Directmaterialquantityvariance=( 1,615,0001,620,000 )lb×$4perlb =( 5,000 )lb×$4.00perlb =$20,000F

The direct material quantity variance is $20,000 (favorable).

Hence, the direct material cost variance, price variance and quantity variance is $141,500 (unfavorable), $161,500 (unfavorable) and $20,000 (favorable).

2.

To determine

The direct labor cost, rate, and efficiency variances.

2.

Expert Solution
Check Mark

Explanation of Solution

Given,
The actual hours used is 265,000 hours.
The standard hours for actual production are 270,000 hours.
The actual rate is $13.75 per hour.
The standard rate is $14.00 per hour.

Calculation of direct labor cost variance:

Particulars Amount ($)
Actual hours at actual cost ( 265,000hours×$13.75 ) 3,643,750
Standard hours at standard cost ( 270,000×$14.00 ) 3,780,000
Direct labor cost variance 136,250 (favorable)
Table(2)

The direct labor cost variance is $136,250 (favorable).

Calculation of direct labor rate variance,

The formula to calculate the direct labor rate variance is,

   Directlaborratevariance=[ Actualhours ×( ActualrateStandardrate ) ]

Substitute 265,000 hours for the actual hours, $13.75 for the actual rate and $14 for the standard rate in the above formula.

   Directlaborratevariance=265,000hours×( $13.75$14.00 )perlb =265,000hours×( $0.25 )perlb =$66,250F

The direct labor rate variance is $66,250 (favorable).

Calculation of direct labor efficiency variance,

The formula to calculate the direct labor efficiency variance is,

   Directlaborefficiencyvariance=[ ( ActualhoursStandardhours ) ×Standardrate ]

Substitute 265,000 for the actual hours, 270,000 for standard hours and $14.00 for the standard rate.

   Directlaborefficiencyvariance=( 265,000270,000 )hours×$14perhour =( 5,000 )hours×$14.00perhour =$70,000F

The direct labor efficiency variance is $70,000 (favorable).

Hence, the direct labor cost variance, rate variance and efficiency variance is $136,250 (favorable), $66,250 (favorable) and $70,000 (favorable).

3.

To determine

The overhead controllable and volume variances.

3.

Expert Solution
Check Mark

Explanation of Solution

Given,
The fixed overhead costs are $2,350,000.
The variable overhead costs are $2,200,000.
The produced units are 54,000 units.
The operating capacity is 90%.

Calculation of the overhead controllable variance,

Particulars Amount ($)
Actual overhead incurred ($2,350,000+$2,200,000) 4,550,000
Budgeted overhead ( 54,000×$90 ) 4,860,000
Controllable overhead variance 310,000 (favorable)
Table(3)

The overhead controllable variance is $310,000 (favorable).

Calculation of the fixed overhead volume variance,

Particulars Amount ($)
Budgeted fixed overhead 2,400,000
Fixed overhead ( $2,400,000 48,000 ×54,000units ) 2,700,000
Fixed overhead volume variance 300,000 (favorable)
Table(4)

The fixed overhead volume variance is $300,000 (favorable).

Thus, the overhead controllable variance is $310,000 (favorable) and the fixed overhead volume variance is $300,000 (favorable).

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Chapter 8 Solutions

MANAGERIAL ACCOUNTING FUND. W/CONNECT

Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 1QSCh. 8 - Prob. 2QSCh. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - Prob. 5QSCh. 8 - Prob. 6QSCh. 8 - Managers use management by exception for control...Ch. 8 - Tercer report the following on one of its...Ch. 8 - Prob. 9QSCh. 8 - Materials cost variances P2 Juan Company’s output...Ch. 8 - The following information describes a companys...Ch. 8 - Prob. 12QSCh. 8 - Fogel Co. expects 116,000 units for the year. The...Ch. 8 - AizPro Corp, reports the following for November....Ch. 8 - Refer to information in QS 8-14. Compute the...Ch. 8 - Prob. 16QSCh. 8 - A Preparing overhead entries P5 Refer to the...Ch. 8 - Mosaic Company applies overhead using machine...Ch. 8 - Refer to the information from QS 8-18. Compute the...Ch. 8 - Farad, Inc., specializes in selling used SUVs....Ch. 8 - In a recent year, BMW sold 216,944 of its 1 series...Ch. 8 - JPAK Company manufactures and sells mountain...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Exercise 21-8 Standard unit cost; total variance...Ch. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Refer to Exercise 8-13. Hart Company records...Ch. 8 - Prob. 15ECh. 8 - After evaluating Null Companys manufacturing...Ch. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Exercise 21-19 Computation of total overhead rate...Ch. 8 - Prob. 20ECh. 8 - Prob. 21ECh. 8 - Prob. 22ECh. 8 - Prob. 23ECh. 8 - Phoenix Companys 2015 master budget included the...Ch. 8 - Prob. 2PSACh. 8 - Prob. 3PSACh. 8 - Prob. 4PSACh. 8 - Prob. 5PSACh. 8 - Prob. 6PSACh. 8 - Tohono Companys 2015 master budget included the...Ch. 8 - Refer to the information in Problem 8-1B. Tohono...Ch. 8 - Prob. 3PSBCh. 8 - Prob. 4PSBCh. 8 - Prob. 5PSBCh. 8 - Problem 21-6BA Materials, labor, and overhead...Ch. 8 - (This serial problem began in Chapter 1 and...Ch. 8 - Prob. 1BTNCh. 8 - Prob. 2BTNCh. 8 - Prob. 3BTNCh. 8 - The reason we use the words favorable when...Ch. 8 - Prob. 5BTNCh. 8 - Prob. 6BTNCh. 8 - Prob. 7BTNCh. 8 - Prob. 8BTNCh. 8 - Prob. 9BTN
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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