Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 8, Problem 8.33E
Identifying favorable and unfavorable variances. Tred-America, Inc., manufactures tires for large auto companies. It uses
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Requirement 2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.
Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the
nearest whole dollar. Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC =
standard cost; SQ = standard quantity.)
Formula
Variance
Direct materials cost variance
Direct labor cost variance
Next compute the efficiency variances. Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Round your
answers to the nearest whole…
A company applies overhead using machine hours. Additional information follows.
Standard variable overhead rate
Actual variable overhead rate
Standard hours of machine use (for actual production)
Actual hours of machine use
AH = Actual Hours
AVR = Actual Variable Rate
SH = Standard Hours
SVR = Standard Variable Rate
Compute the variable overhead spending, efficiency variances and the total variable overhead variance. Identify each variance as
favorable or unfavorable.
Note: Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.
Actual Variable Overhead
$4.40 per machine hour
$ 4.60 per machine hour
5,400 hours
5,550 hours
Flexible Budget Variable OH
Standard Applied Variable OH
Best, Inc. uses a standard cost system and provides the following information. (Click the icon to view the
information.) variable overhead, $3,800; actual fixed overhead, $3, 500; actual direct labor hours, 1,400.
Read the requirements. Data table Requirement 1. Compute the variable overhead cost and efficiency
variances and fixed overhead cost and volume variances. Begin with the variable overhead cost and
efficiency variances. Select the required formulas, compute the variable overhead cost and favorable (F) or
unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead;
SC = standardco \table [[,, Formula,Variance], [VOH cost variance, = , 1 = , ], [VOH efficiency variance, =,1 =, 0
Chapter 8 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 8 - How do managers plan for variable overhead costs?Ch. 8 - How does the planning of fixed overhead costs...Ch. 8 - How does standard costing differ from actual...Ch. 8 - What are the steps in developing a budgeted...Ch. 8 - What are the factors that affect the spending...Ch. 8 - Assume variable manufacturing overhead is...Ch. 8 - Describe the difference between a direct materials...Ch. 8 - What are the steps in developing a budgeted fixed...Ch. 8 - Why is the flexible-budget variance the same...Ch. 8 - Explain how the analysis of fixed manufacturing...
Ch. 8 - Provide one caveat that will affect whether a...Ch. 8 - The production-volume variance should always be...Ch. 8 - What are the variances in a 4-variance analysis?Ch. 8 - Overhead variances should be viewed as...Ch. 8 - Describe how flexible-budget variance analysis can...Ch. 8 - Each of the following statements is correct...Ch. 8 - Steed Co. budgets production of 150,000 units in...Ch. 8 - As part of her annual review of her companys...Ch. 8 - Culpepper Corporation had the following...Ch. 8 - Fordham Corporation produces a single product. The...Ch. 8 - Variable manufacturing overhead, variance...Ch. 8 - Fixed manufacturing overhead, variance analysis...Ch. 8 - Variable manufacturing overhead variance analysis....Ch. 8 - Fixed manufacturing overhead variance analysis...Ch. 8 - Manufacturing overhead, variance analysis. The...Ch. 8 - 4-variance analysis, fill in the blanks. ProChem...Ch. 8 - Straightforward 4-variance overhead analysis. The...Ch. 8 - Straightforward coverage of manufacturing...Ch. 8 - Overhead variances, service sector. Meals Made...Ch. 8 - Total overhead, 3-variance analysis. Pampered...Ch. 8 - Production-volume variance analysis and...Ch. 8 - Overhead variances, service setting. Carlyle...Ch. 8 - Identifying favorable and unfavorable variances....Ch. 8 - Flexible-budget variances, review of Chapters 7...Ch. 8 - Comprehensive variance analysis. Cooking Whiz...Ch. 8 - Journal entries (continuation of 8-35). A. Prepare...Ch. 8 - Graphs and overhead variances. Best Around, Inc.,...Ch. 8 - Overhead variance, missing information. Consider...Ch. 8 - Flexible budgets, 4-variance analysis. (CMA,...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Overhead variances and sales-volume variance. The...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Comprehensive review of Chapters 7 and 8, working...Ch. 8 - Review of Chapters 7 and 8, 3-variance analysis....Ch. 8 - Nonfinancial variances. Kathys Kettle Potato Chips...Ch. 8 - Overhead variances, service sector. Cavio is a...Ch. 8 - Direct-cost and overhead variances, income...Ch. 8 - Overhead variances, ethics. Carpenter Company uses...
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- Required A Required B Calculate the variances. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing costs Variancesarrow_forwardHaliburton Mills Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product): Standard Cost Actual Cost Direct materials: Standard: 2.0 metres at $4.50 per metre Actual: 2.4 metres at $4.25 per metre Direct labour: Standard: 2.4 hours at $3.50 per hour Actual: 2.0 hours at $3.85 per hour $ 9.00 $10.20 8.48 7.70 Variable manufacturing overhead: Standard: 2.4 hours at $3.00 per hour Actual: 2.0 hours at $3.65 per hour 7.20 7.30 Fixed manufacturing overhead: Standard: 2.4 hours at $3.90 per hour Actual: 2.0 hours at $3.95 per hour Total cost per unit 9.36 7.90 $33.96 $ 33.10 Actual costs: 4,580 units at $33.10 Standard costs: 4,500 units at $33.96 Difference in cost-favourable $148,950 152,820 $ 3,870 During this period, the company produced 4,500 units of product. A comparison of standard and actual costs…arrow_forwarda. Analyze the factory overhead variance of Golden Manufacturers Inc., based on the given data.arrow_forward
- Which of the following statements Is true? Multiple Choice The material quantity variance is recorded when overhead is applied to production. The material price and the material quantity variances are recorded at the same time., The materials quantity variance is recorded when materials are used in production. The materials quantity variance is recorded when materials are purchased.arrow_forwardA manufacturing company reports the following for one of its products. Compute the direct materials (a) price variance and (b) quantity variance and classify each as favorable or unfavorable.arrow_forwardExercise 16-36 (Algo) Variable Cost Variances (LO 16-5) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 122,000 liters at a budgeted price of $240 per liter this year. The standard direct cost sheet for one liter of the preservative follows. (2 pounds @ $15) (0.5 hours @ $46) Direct materials $30 Direct labor 23 Variable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue $28,138 Less variable…arrow_forward
- The following information is available for a manufacturer. Compute the direct labor rate and efficiency variances and label them as favorable (F) or unfavorable (U).arrow_forward1) In a company's standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was: A) favorable and twice the labor efficiency variance. B) unfavorable and twice the labor efficiency variance. C) favorable and half the labor efficiency variance. D) unfavorable and half the labor efficiency variance. 1)arrow_forwardI. In throughput costing, using SD cost, all variances including direct labor variances must be closed to Cost of sales if the said variances are immaterial.II. When units sold exceeded the units produced, then income under direct costing will be higher than absorption costing income. A• True False B• True True C• False True D• False Falsearrow_forward
- The president of McGrade Industries wants an analysis prepared to help explain why the variances computed in requirement 1 occurred. Using the worksheet called PRIMEVAR that follows these requirements, calculate the material and labor variances for McGrade Industries. The problem requires you to enter the input in the Data Section as well as formulas in the Answer Section.arrow_forwardPerformance Report for Variable Variances Humo Company provided the following information: Required: Prepare a performance report that shows the variances for each variable overhead item (inspection and power).arrow_forwardFixed Overhead Spending and Volume Variances, Columnar and Formula Approaches Branch Company provided the following information: Required: 1. Using the columnar approach, calculate the fixed overhead spending and volume variances. 2. Using the formula approach, calculate the fixed overhead spending variance. 3. Using the formula approach, calculate the fixed overhead volume variance. 4. Calculate the total fixed overhead variance.arrow_forward
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