SOLUTIONS MANUAL – STANDARD COSTING
Chapter 10
Exercise 3-1. Online Concept Map
Exercise 3-2.
Across
2.
PRICE VARIANCE—The difference between what was paid for inputs and what should have been paid for inputs
6.
BUDGET—Expressed in total amount
10. VARIABLE OVERHEAD SPENDING—The variance resulting from the difference between actual variable overhead and budgeted
variable overhead based upon actual hours
11. MATERIAL YIELD—A variance which results when multiple materials are used, the difference between the total quantity and
the standard quantity of output when a nonstandard mix of materials
14. TOTAL VARIANCE—The difference between total actual cost incurred and total standard cost applied
15. PRACTICAL—Standards that are attainable with reasonable effort
17. MATERIAL MIX—This variance occurs when multiple materials are used, the effect of substituting a non-standard mix of
materials during the production process
18. SIGNIFICANT—In using variance reports, top management normally looks for _________________ variances
19. IDEAL—Standards that provide for no human limitations or operating delays
20. EFFICIENCY VARIANCE—The difference between standard quantity allowed and quantity used for a unit of output
Down
1.
3.
FIXED OVERHEAD SPENDING—A variance which is the difference between actual and budgeted fixed factory overhead
VARIABLE OVERHEAD EFFICIENCY—This is the variance which results from difference between budgeted variable overhead for
actual hours and standard overhead
4.
FIXED OVERHEAD VOLUME—A variance which is the difference between budgeted and applied fixed factory overhead
5.
UNFAVORABLE—If the actual direct labor hours worked is greater than the standard hours, the labor quantity variance will be
___________________
7.
EXPECTED—Standards that reflect what is anticipated to occur
8.
LABOR YIELD—This variance is the result when multiple labor categories are used, the monetary impact of using a higher or
lower number of hours than a standard allows
9.
OVERHEAD APPLIED—The standard number of hours allowed times the predetermined overhead rate
12. FAVORABLE—the labor rate variance will be ____________________ if the standard rate of pay is greater than the actual rate
of pay
13. LABOR MIX—a variance which results when multiple labor categories are used, the financial effect of using a different mix of
workers in a production process
16. STANDARD—This is expressed as a unit amount
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EclipseCrossword.com
Exercise 3-3
1. Second Statement
2. Second Statement
3. Second Statement
4. Second Statement
5. Second Statement
6. First Statement
7. First Statement
8. First Statement
9. First Statement
10. First Statement
11. Second Statement
12. First Statement
13. Second Statement
14. First Statement
15. Second Statement
L
Exercise 3-4
1. B
2. A
3. D
4. A
5. D
6.B
7.D
8.A
9.A
10.C
11.B
12.B
13.A
14.B
15.A
Exercise 3-5 (15-20 mins.)
Ingredient
Calamansi Kool-Drink
Sugar
Kiwis
Protein Tablets
Water
Amount Per Gallon
19.6 oz.
.40 lb.
.63
1
40 oz.
Standard Usage
Calamansi Kool-Drink (a)
20.00 oz
Sugar
(b)
.50 lb.
Kiwis
(c)
.70
Protein Tablets
1
Water
40 oz.
Standard Cost per Gallon
(a)
(b)
(c)
.98X = 19.6 ounces
.80X = .40 pounds
.90X = .63 kiwis X =
X=
X=
.70
Standard Waste
2%
20%
10%
0%
0%
Standard Price
P .15
.60
.80
.90
.0025
20.00
.50
Exercise 3-6 Standard Costing – Materials
a. Standard Price = (P93 x 92%) +P6.75+P0.75 = P93.06
b. Standard Kilograms = 0.50 kg +0.05 kg+ 0.15kg = 0.70 kg
Exercise 3-7 Standard Costing – Labor
a. Standard Price = (P20.85x110%) + P6.42 = P29.355 per DLH
b. Standard hours per KG = 0.80 +0.08 +0.14 = 1.02 DLH
c. Standard cost per unit = P29.355 x 1.02DLH =P29.94 per unit
Exercise 3-8 Material Variances
(a.)
16,400*P16.40=
P268,960
16,400*P15.60=
P255,840
P13,120 U (MPu)
(3,280*5.2)*P15.60=
P266,073.60
P10,233.60 F (MQV)
P1,443.20 U (Total Material Variance)
(b.)
P278,800
17,000*P15.60=
P265,200
P13,600 U (MPP)
P9,360 U (MI)
16,400*P15.60=
P255,840
Standard Cost
P3.00
.30
.56
.90
.10
P4.86
Exercise 3-9 Material variance
11,500*P5.50=
P63,250
11,500*P6.00=
P69,000
P5,750 F (MPu)
11,250*P6.00=
P67,500
P1,500 U (MQV)
P4,250 F (Total Material Variance)
Exercise 3-10 Labor Variances (15-20 mins.)
Actual Hours
× Actual Rate
10,000 × P9.20 =
P92,000
Actual Hours
× Standard Rate
10,000 × P9.00 =
P90,000
Price Variance
Standard Hours
× Standard Rate
9,500 × P9.00 =
P85,500
Quantity Variance
P2,000 U
P4,500 U
Total
Labor Variance
P6,500 U
Exercise 3-11 Labor variance
15,000*P12.00=
P180,000
15,000*P11.60=
P174,000
P6,000 U (LR)
18,750*P11.60=
P217,500
P43,500 F (LE)
P37,500 F (Total Material Variance)
Exercise 3-12 Labor Variance
P148,675
9,500*P15.50=
P147,250
P1,425 U (LR)
(32,000x0.3)*P15.50=
P148,800
P1,550 F (LE)
P125 F (Total Material Variance)
Exercise 3-13 Direct Material and Direct Labor
a.
14,220 units
(P261,520-7000+1440)/ (6x3)
b.
28,440 SH
(P144,620+11540-13960)/5
c.
31,232 AH
(P144,620+11,540)/5
d.
42,660 lbs
(P261,520-7000+1440)/6
e.
42,420 lbs
(261,520-7000) / P6
Exercise 3-14 Direct Material and Direct labor
a. Standard cost per roll
= P9,000/450 = P20.00
Standard number of pounds per roll = P20/P4 = 5 pounds per roll
b. Actual pounds = (P9,000 + P80)/P4 = 2,270 pounds
c. Materials price variance = P9,600 - (P9,000 + P80)= P520 unfavorable
d. Total standard labor cost of actual hours = (450 x 3 x P8) + P400 = P11,200
Actual hours
= P11,200/P8 = 1,400
Total actual cost = 1,400 x P8.25 = P11,550
e. Labor price variance = P11,550 - P11,200 = P350 unfavorable
Exercise 3-15 Overhead Variances
a.
Variable Spending = P52,500 – (20,000xP1.75) = 17,500 U
Variable Efficiency = (20,000xP1.75) – (9,000x2.50x1.75) = 4,375 F
Fixed Spending = P76,000-77,500 = 1,500 F
Fixed Volume = 77,500 – (9,000x2.50x3.10) = P7,750 U
b.
Spending Variance = 17,500 U – 1,500 F = 16,000 U
Efficiency = 4,375 F
Volume = 7,750 U
c.
Controllable = 16,000U – 4,375F = 11,625 U
Non-Controllable = Volume Variance = 7,750 U
Exercise 3-16 Various Variances
Budgeted fixed overhead rate = Fixed overhead/Denominator quantity
= P84,800/53,000 direct labor-hours
= P1.60/direct labor-hour
Actual fixed overhead = Budgeted fixed overhead + Budget variance
= P84,800 + P7,200
= P92,000
Actual variable overhead = Total actual overhead – Actual fixed overhead
= P262,500 - P92,000
= P170,500
Actual variable overhead rate = Actual variable overhead/Actual hours
= P170,500/55,000
= P3.10
Spending variance = AH (AR - SR)
= 55,000 (P3.10 - P3.00)
= P5,500 U
SH X SR = AH X SR - overhead efficiency variance
= 55,000 X P3.00 - P15,000
= P15,000
Standard hours allowed = (SH X SR)/SR
= P150,000/P3.00
= 50,000 hours
Actual units produced = Standard hours allowed/hours per unit
= 50,000 hours/2 hours per unit
= 25,000 units
Volume variance = Budgeted fixed - (SH X SR)
= P84,800 - (50,000 X P1.60)
= P84,800 - P80,000
= P4,800 U
Summary:
Actual hours
Standard hours allowed
Denominator hours
Spending variance
Efficiency variance
Budget variance
Volume variance
5,000 hours
50,000 hours
53,000 hours
P 5,500 U
P15,000 U
P 7,200 U
P 4,800 U
Exercise 3-17 Various Variances
a. & b.
Raw Materials:
Price variance = AQ(AP − SP) (based on quantity purchased)
= 21,000 (P17 − P16) = P21,000 U
Quantity variance = SP(AQ − SQ) (based on quantity used)
= P16(33,400 − *33,600) = P3,200 F
* SQ = 22,400 units at 1.5 grams per unit = 33,600
c. & d.
Direct labor:
Rate variance = AH(AR − SR) = 16,750(P8 − P8) = 0
Efficiency variance = SR(AH − SH) = P8(16,750 − *16,800) = P400 F
* SH = 22,400 units at 0.75 hours per unit = 16,800
e. & f.
Variable overhead:
Spending variance = AH(AR − SR) = 16,750(*P2.90 − P3) = P1,675 F
* AR = P48,575 / 16,750 hours = P2.90
Efficiency variance = SR(AH − SH) = P3(16,750 − *16,800) = P150 F
* SH = 22,400 units at 0.75 hours per unit = 16,800
Exercise 3-18 Journal Entry Preparation
a.
Raw Materials (10,000 ounces @ P3.50 per ounce)
Materials Price Variance
(10,000 ounces @ P0.35 per ounce U)
Accounts Payable
b.
c.
35,000
3,500
38,500
Work in Process (7,200 ounces @ P3.50 per ounce)
Materials Quantity Variance
(800 ounces U @ P3.50 per ounce)
Raw Materials (8,000 ounces @ P3.50 per ounce)
25,200
Work in Process (2,100 hours @ P10 per hour)
Labor Rate Variance (2,000 hours @ P1.50 per hour U)
Labor Efficiency Variance
(100 hours F @ P10 per hour)
Wages Payable (2,000 hours @ P11.50 per hour)
21,000
3,000
Exercise 3-19 Journal Entries
SOLUTION
Materials .....................................................................................................................
Materials Purchase Price Variance.......................................................................
Accounts Payable .................................................................................................
2,800
28,000
1,000
23,000
90,000
2,400
87,600
Work in Process ...........................................................................................................
Materials ..............................................................................................................
Materials Quantity Variance ................................................................................
78,000
Work in Process ...........................................................................................................
Labor Rate Variance ....................................................................................................
Payroll ..................................................................................................................
Labor Efficiency Variance .....................................................................................
143,750
750
Factory Overhead Control ...........................................................................................
Various Credits .....................................................................................................
256,000
Work in Process ...........................................................................................................
Factory Overhead Controllable Variance ....................................................................
Factory Overhead Control ....................................................................................
Factory Overhead Volume Variance ....................................................................
254,750
2,950
77,000
1,000
144,000
500
256,000
256,000
1,700
or
Work in Process ...........................................................................................................
Factory Overhead Control ....................................................................................
254,750
Factory Overhead Controllable Variance ....................................................................
Factory Overhead Volume Variance ....................................................................
Factory Overhead Control ....................................................................................
2,950
254,750
1,700
1,250
Exercise 3-20 Journal Entries
SOLUTION
Work in Process ...........................................................................................................
Materials Quantity Variance ................................................................................
Materials ..............................................................................................................
24,000
400
23,600
Work in Process ...........................................................................................................
Labor Efficiency Variance [P12 x (4,200 DLH - 4,000 DLH)] .........................................
Labor Rate Variance [(P12.50 - P12) x 4,200 DLH] ......................................................
Payroll (P12.50 x 4,200 DLH) ................................................................................
48,000
2,400
2,100
Factory Overhead Control ...........................................................................................
Various Credits .....................................................................................................
252,500
Overhead at 100% Overhead at 80% $280,000 $250,000
=
Hours at 100% Hours at 80%
5,000 4,000
= $30 per hour variable overhead
52,500
252,500
Work in Process .............................................................................................
Factory Overhead Variable Efficiency Variance ............................................
Factory Overhead Volume Variance..............................................................
Factory Overhead Control ......................................................................
Factory Overhead Spending Variance ....................................................
224,000
2
6,000
3
26,000
252,500
1
3,500
Actual factory overhead ................................................................................
Budget allowance based on actual hours:
Fixed expense ........................................................................................ P
Variable expense (4,200 hours x P30) ....................................................
Factory overhead spending variance ............................................................
1
P
252,500
P
256,000
(3,500) fav.
P
256,000
P
250,000
6,000 unfav.
P
250,000
P
224,000
26,000 unfav.
1
130,000
126,000
P250,000 - P30 (4,000) = P130,000 fixed overhead
2
Budget allowance based on actual hours ....................................................
Budget allowance based on standard hours allowed:
Variable overhead (4,000 x P30) .......................................................... P
Fixed overhead (P250,000 - P120,000) ................................................
Variable efficiency variance..........................................................................
120,000
130,000
3
Budget allowance based on standard hours allowed ..................................
Standard factory overhead charged to production
(P56 x 4,000) ........................................................................................
Volume variance ...........................................................................................
Exercise 3-21 Journal Entries
SOLUTION
Factory Overhead Control .............................................................................................
Various Credits ......................................................................................................
199,000
199,000
Work in Process (P40 F.O. rate x 4,600 SH) ...................................................................
Applied Factory Overhead .....................................................................................
184,000
Applied Factory Overhead .............................................................................................
Variable Efficiency Variance [P9 var. x (5,200 AH - 4,600 SH)] ......................................
Fixed Efficiency Variance [P31 fix. x (5,200 AH - 4,600 SH)] ..........................................
Spending Variance .................................................................................................
Idle Capacity Variance [P31 fix. x (5,000 BH - 5,200 AH)] ......................................
Factory Overhead Control .....................................................................................
184,000
5,400
18,600
184,000
2,800
6,200
199,000
Exericise 3-22 Disposition
SOLUTION
(1)
Materials price usage variance to:
P150,000
Work in process ......................................................... ---------------P1,000,000
x
P (10,000)
=
(1,500) fav.
P50,000
Finished goods .......................................................... ---------------P1,000,000
P800,000
Cost of goods sold ..................................................... ---------------P1,000,000
Total ..................................................................
x
P (10,000)
=
(500) fav.
x
P (10,000)
=
(8,000) fav.
P
(10,000) fav.
Materials quantity variance to:
P150,000
Work in process ......................................................... ---------------P1,000,000
x
P
22,280
= P
3,342 unfav.
P50,000
Finished goods........................................................... ---------------P1,000,000
x
P
22,280
=
1,114 unfav.
x
P
22,280
=
17,824 unfav.
P800,000
Cost of goods sold ..................................................... ---------------P1,000,000
Total ..................................................................
P
22,280 unfav.
Labor variances to:
P250,000
Work in process ......................................................... ---------------P2,500,000
x
P
(4,000)
Finished goods (same as to work in process) ............
P2,000,000
Cost of goods sold ..................................................... ---------------P2,500,000
Total ..................................................................
1
Labor rate variance
(P27,000) fav.
-
Labor efficiency variance
P23,000 unfav.
=
=
x
P
(4,000)
= P
(400) fav.
=
(400) fav.
=
(3,200) fav.
P
(4,000)
1
fav.
Net labor variance
(P4,000) fav.
Overhead variances to:
P150,000
Work in process ......................................................... ---------------P1,500,000
x
P
31,500
=
P150,000
Finished goods........................................................... ---------------P1,500,000
x
P
31,500
=
P
3,150 unfav.
3,150 unfav.
P1,200,000
Cost of goods sold ..................................................... ---------------P1,500,000
Total ..................................................................
x
P
31,500
=
25,200 unfav.
P 31,500 unfav.
(2)
Standard cost of goods sold:
Materials ..................................................................................................................................
Labor ........................................................................................................................................
Overhead ..................................................................................................................................
P
P
Add favourablee variances:
Materials quantity ....................................................................................................................
Overhead ..................................................................................................................................
Less favourable variances:
Materials price usage ...............................................................................................................
Labor ........................................................................................................................................
Cost of goods sold after allocation ...................................................................................................
800,000
2,000,000
1,200,000
4,000,000
17,824
25,200
P
(8,000)
(3,200)
4,031,824
Exercise 3-23. Variance Analysis (15 minutes)
Actual Quantity
× Actual Price
(1)
32,800 × (2)P1.95 =
P63,960
Actual Quantity
× Standard Price
(1)
32,800 × P2 =
P65,600
Price Variance
P1,640 U
Standard Quantity
× Standard Price
32,000 × P2 =
P64,000
Quantity Variance
P1,600 U
Total
Materials Variance
P40 F
(1) (P64,000 + P1,600) ÷ P2
(2) (P65,600 – P1,640) ÷ P32,800
a. Materials quantity variance = P1,600 U (P1,640 F – P40 F)
b. Actual price paid per foot of wood = P1.95.
Exercise 3-24 Variance Analysis (20-25 mins.)
(a)
Materials quantity variance = P6,000 unfavorable.
(AQ × SP) – (SQ × SP) = Materials quantity variance
(126,000 × P3) – (124,000 × P3) = P378,000 – P372,000 = P6,000 unfavorable
SQ = 31,000 × 4 = 124,000 pounds
(b)
Total direct labor variance = P15,000 unfavorable.
(AH × AR) – (SH × SR) = Total direct labor variance
(92,000 × P8.25) – (93,000 × P8) = P759,000 – P744,000 = P15,000 unfavorable
SH = 31,000 × 3 = 93,000 direct labor hours
(c)
Direct labor quantity variance = P8,000 favorable.
(AH × SR) – (SH × SR) = Direct labor quantity variance
(92,000 × P8) – (93,000 × P8) = P736,000 – P744,000 = P8,000 favorable
(d)
Direct materials price variance = P25,200 favorable.
(AQ × AP) – (AQ × SP) = Direct materials price variance
(126,000 × P2.80) – (126,000 × P3) = P352,800 – P378,000 = P25,200 favorable
(e)
Total overhead variance = P12,000 favorable.
(Actual overhead) – (Overhead applied) = Total overhead variance
(P155,000 + P205,000) – (93,000 × P4) = P360,000 – P372,000 = P12,000 favorable
Standard hours = 31,000 × 3 = 93,000 direct labor hours
Exercise 3-25. Effective Communication (15-20 mins.)
==================================================================================================
Dear Rey,
Last month was a tough one for all of us, wasn't it? Your workers certainly did go the extra mile, no doubt about it.
You asked about your efficiency variance. When we calculate it, we count the number of hours it took to get good
output. Since we had such high spoilage, we got fewer units, but used more hours. That is why your efficiency variance
was negative. It does not imply that you didn't do your best. It just means that we investigate to see what happened.
Good luck, and I hope this month is a better one for all of us.
(signed)
============================================================================================================
COMPREHENSIVE PROBLEMS
Problem 3-A Analysis
a.
Direct materials' unfavorable price variance may have been caused by: (1) paying a higher price than the standard for the
period, (2) changing to a new vendor, or (3) buying higher-quality materials.
Direct manufacturing labor's favorable price variance may have been caused by: (1) changing the work force by hiring
lower-paid employees, (2) changing the mix of skilled and unskilled workers, or (3) not giving pay raises as high as
anticipated when the standards were set for the year.
b.
Direct materials' favorable efficiency variance may have been caused by: (1) employees/machinery working more efficiency
and having less scrap and waste materials, (2) buying better-quality materials, or (3) changing the production process.
Direct manufacturing labor's unfavorable efficiency variance may have been caused by: (1) poor working conditions, (2)
changes in the production process (learning something new initially takes longer), (3) different types of direct materials to
work with, or (4) poor attitudes on behalf of the workers.
Problem 3-B Material Variances
(Actual unit price - Standard unit price) x Actual usage = Materials price usage variance
Halibut: (P.70 per oz. - P.60 per oz.) x 8,250 oz.........................................................................
P 825 unfav.
Asparagus: (P.20 per oz. - P.25 per oz.) x 5,700 oz....................................................................
(285) fav.
Rice: (P.12 per oz. - P.10 per oz.) x 7,350 oz. ............................................................................
147 unfav.
Yogurt: (P.22 per oz. - P.20 per oz.) x 4,725 oz..........................................................................
94.5 unfav.
Materials price usage variance .................................................................................................. P 781.50 unfav.
(Actual quantity - Standard quantity allowed) x Standard price = Materials quantity variance
Halibut: (8,250 oz. - 9,000 oz.) x P.60 ........................................................................................
Asparagus: (5,700 oz. - 6,000 oz.) x P.25 ...................................................................................
Rice: (7,350 oz. – 7,500 oz.) x P.10 ............................................................................................
Yogurt: (4,725 oz. – 4,500 oz.) x P.20 ........................................................................................
Materials quantity variance ......................................................................................................
P(450)
(75)
(15)
45
P(495)
fav.
fav.
fav.
unfav.
fav.
Problem 3-C. Labor Variances
Wilson
P 11.00
10.00
P 1.00
x
8
P 8.00
unfav.
Actual rate ..................................................
Standard rate .............................................
Rate difference ...........................................
Multiplied by hours worked .......................
Labor rate variance ....................................
Xavier
P 9.25
10.00
P (.75)
x
8
P (6.00)
fav.
Yelding
P 10.50
10.00
P
.50
x
8
P 4.00
unfav.
Ziachin
P 9.75
10.00
P (.25)
x
8
P (2.00)
fav.
Total
P 40.50
40.00
P
.50
x
8
P 4.00
unfav.
Problem 3-D Indirect Cost Variances
(a) Four Way Approach
Variable OH Variances:
3,700*P3.00=
P11,100
P10,730
P370 F
VOH
Spending Variance
(7,600*0.50hrs)*P3.00=
P11,400
P300 F
VOH
Efficiency Variance
Fixed OH Variances:
P29,950
4,000*P8=
(7,600*0.50hrs)*P8.00=
P32,000
P2,050 F
FOH
Spending Variance
(b-d)
P10,730+29,950=
P40,680
P1,600 U
FOH
Volume Variance
P11,100+32,000=
P43,100
P2,420 F
Overhead Spending
Variance
P30,400
P11,400+32,000=
P43,400
P300 F
Overhead Efficiency
Variance
P11,400+30,400=
P41,800
P1,600 U
Overhead Volume
Variance
THREE WAY
TWO WAY
P2,720 F
Controllable Variance
P1,600 U
Uncontrollable Volume
P1,120 F
Total Overhead Variance
ONE WAY
Problem 3-E Indirect Cost Variances
Actual factory overhead .........................................................................
Budget allowance based on standard:
Budgeted fixed expense (40% x P10 x
15,000 units) .............................................................................
Variable expenses:
12,000 hrs. allowed x P10 x .60 ................................................
15,000 hrs. allowed x P10 x .60 ................................................
Controllable variance .............................................................................
Budgeted allowance based on standard
hours allowed ..................................................................................
Standard hours allowed x Standard factory
overhead rate:
12,000 hrs. x P10 ......................................................................
15,000 hrs. x P10 ......................................................................
Volume variance.....................................................................................
Problem 3-F. Indirect Cost Variances
Actual factory overhead .........................................................................
Standard overhead chargeable to production (5,200
standard hours allowed x P5 overhead rate) ..................................
Overall factory overhead variance .........................................................
Actual factory overhead .........................................................................
Budget allowance based on actual hours:
Variable overhead (4,800 actual hours x P3)...................................
Fixed overhead ................................................................................
Spending variance ..................................................................................
Budget allowance based on actual hours (from above) .........................
Budget allowance based on standard hours:
Variable overhead (5,200 standard hours x P3) ..............................
Fixed overhead ................................................................................
Variable efficiency variance ...................................................................
Budget allowance based on standard hours (from above) ....................
Standard factory overhead chargeable to production
(from above) ....................................................................................
P
May
140,100
June
149,300
P
(60,000)
(60,000)
(72,000)
P
P
8,100 unfav.
132,000
P
(90,000)
(700) fav.
P
150,000
(120,000)
P
12,000 unfav.
(150,000)
0
P
25,600
P
P
26,000
(400) favorable
25,600
P
24,400
1,200 unfavorable
P
24,400
P
25,600
(1,200) favorable
P
25,600
P14,400
10,000
P15,600
10,000
26,000
Volume variance.....................................................................................
P
(400) favorable
Spending variance ..................................................................................
Variable efficiency variance ...................................................................
Volume variance.....................................................................................
Overall factory overhead variance .........................................................
P
1,200
(1,200)
(400)
(400) favorable
P
Problem 3-G. Indirect Cost Variances
Actual factory overhead ....................................................................................
Budget allowance based on actual hours worked:
Fixed factory overhead ...............................................................................
Variable factory overhead:
P30,000
10,300 actual hrs. x ---------------- .........................................................
10,000 DLH
Spending variance .............................................................................................
Budget allowance based on actual hours worked.............................................
Actual hours x standard overhead rate:
P30,000 + P12,000
10,300 hrs. x -------------------------- ........................................................
10,000 DLH
Idle capacity variance ........................................................................................
Budget allowance based on actual hours worked.............................................
Budget allowance based on standard hours allowed:
Fixed expense .............................................................................................
Variable expense (10,200 standard hours
allowed x P3 variable overhead rate) ..................................................
Variable efficiency variance ..............................................................................
Actual hours (10,300) x fixed overhead rate (P1.20).........................................
Standard hours allowed (10,200) x fixed overhead
rate (P1.20) .................................................................................................
Fixed efficiency variance ...................................................................................
Problem 3-H Various Variances
1.
App rate = P6/DLH
TOHC = P50,000 + P1/DLH
Std O (A)
5,000 ´2 = 10,000
(B)
5,000 ´4 = 20,000
Std Hrs.
5,000 ´2 = 10,000
2.
a.
1. (P7.20 - P7.00) ´12,000 =
2. (P3.90 - P4.00) ´20,000 =
P2,400 U
2,000 F
P 400 U
b.
1. (10,500 - 10,000) ´P7.00 =
2. (19,800 - 20,000) ´P4.00 =
P3,500 U
800 F
P2,700 U
c.
P79,380 - (9,800 ´P8) = P980 U
d.
(9,800 - 10,000) ´P8 = P1600 F
P
47,500
P12,000
30,900
42,900
P
P
4,600 unfav.
42,900
43,260
P
P
(360) fav.
42,900
P
42,600
300 unfav.
P
12,360
P
12,240
120 unfav.
P12,000
30,600
e.
(10,000 - 10,000) ´P5 = 0
f.
(9,800 - 10,000) ´P1 = P200 F
g.
Fix Spd P48,100 - P50,000 = P1,900 F
Var Spd P21,000 - (9,800 ´P1) = P11,200 U
PROBLEM 3-I
1. The fixed overhead spending (budget) variance is the difference between actual and budgeted fixed factory overhead.
Actual fixed overhead was P540,000. Budgeted fixed overhead was P5 per hour based on a capacity of 100,000 direct labor
hour per month, or P500,000. Because these costs are fixed, the budgeted fixed overhead is the same at any level of
production. Hence, the variance is P40,000 unfavorable (P540,000 – P500,000).
2.
The variable overhead spending variance is the difference between the actual variable overhead and the variable overhead
based on the standard rate and the activity level. Thus, the variable overhead spending variance were P12,000 favorable
[P740,000 actual cost – (P8 standard rate x 94,000 actual hours)]. Because actual is less than standard, the variance was
favorable.
3.
The variable overhead efficiency variance equals the standard price (P8 an hour) times the difference between the actual
hours and the standard hours allowed for the actual output. Thus the variance is P48,000 [8 x (94,000 actual hours – (4
standard hours per unit x 22,000 units produced)]. The variance is unfavourable because actual hours exceeded standard
hours.
4.
The direct labor price variance equals actual labor hours times the difference between standard and actual labor rates. The
actual labor cost was P940,000 for 94,000 or P10 per hour. The standard rate was P9 per hour. Thus the variance is P94,000
(94,000 hours x (10-9)). Since actual is greater than the standard, unfavourable.
5.
The direct labor rate efficiency variance equals the standard rate times the difference between actual and standard hours.
Hence, the variance is P54,000[9 x (94,000 hours – (4 std hrs per unit x 22,000 units)). The variance is unfavourable because
the actual exceeded the standard.
PROBLEM 3-J. (40-45 mins.)
(a)
1.
Direct materials price variance = P16,400 Unfavorable.
(AQ × AP) – (AQ × SP)
(82,000 × P4.20) – (82,000 × P4.00) = P344,400 – P328,000 = P16,400
2.
Direct materials quantity variance = P12,000 Favorable.
(AQ × SP) – (SQ × SP)
(73,000 × P4.00) – (76,000* × P4.00) = P292,000 – P304,000 = P12,000
*SQ = 38,000 × 2 pounds = 76,000 pounds
3.
Direct labor price variance = P7,800 Favorable.
(AH × AR) – (AH × SR)
(19,500 × P9.60) – (19,500 × P10.00) = P187,200 – P195,000 = P7,800
4.
Direct labor quantity variance = P5,000 Unfavorable.
(AH × SR) – (SH × SR)
(19,500 × P10.00) – (19,000* × P10.00) = P195,000 – P190,000 = P5,000
*SH = 38,000 × 1/2 hour = 19,000 hours
5.
Actual overhead – Overhead applied = Total overhead variance.
P117,000 – P114,000* = P3,000 Unfavorable
*SH 19,000 × P6.00 = P114,000
*(b)
1.
Raw Materials Inventory
328,000
Materials Price Variance
16,400
Accounts Payable
344,400
(To record purchase of materials)
2.
Work in Process Inventory
304,000
Materials Quantity Variance
12,000
Raw Materials Inventory
292,000
(To record issuance of direct materials)
3.
Factory Labor
195,000
Labor Price Variance
7,800
Wages Payable
187,200
(To record direct labor costs)
4.
Work in Process Inventory
190,000
Labor Quantity Variance
5,000
Factory Labor
195,000
(To assign factory labor to jobs)
5.
Manufacturing Overhead
117,000
Accounts Payable/Cash etc.
(To record overhead incurred)
117,000
6.
7.
Work in Process Inventory
114,000
Manufacturing Overhead
114,000
(To assign overhead to jobs)
Finished Goods Inventory (38,000 × P16)
608,000
Work in Process Inventory
608,000
(To record transfer of completed work to finished goods)
PROBLEM 3-K
Actual quantities at individual standard materials cost ..........................................................
Actual input quantity at weighted average of standard
2
materials cost (20,160 x P.381 ) .......................................................................................
Materials mix variance ............................................................................................................
Actual input quantity at weighted average of standard
2
materials cost (20,160 x P.381 ) .......................................................................................
Actual output quantity at standard materials cost per
3
pound of output (18,500 lbs. x P.40 )...............................................................................
Materials yield variance ..........................................................................................................
1
Beeswax ...........................................................
Synthetic wax ..................................................
Colors ...............................................................
Scents ..............................................................
2
Weighted average standard materials costs:
Beeswax ...........................................................
4,100
13,800
2,200
60
20,160
P 11,620
1
P
P
7,681
3,939 unfav.
P
7,681
P
7,400
281 unfav.
lbs.
lbs.
lbs.
lbs.
lbs.
@ P1 per lb. ..........................................
@ P.20 per lb. .......................................
@ P2 per lb. ..........................................
@ P6 per lb. ..........................................
..............................................................
200 lbs.
@ P1 .....................................................
P
4,100
2,760
4,400
360
P 11,620
P 200
Synthetic wax ..................................................
Colors ...............................................................
Scents ..............................................................
840
7
3
1,050
lbs.
lbs.
lbs.
lbs.
Standard materials cost =
3
@ P.20 ..................................................
@ P2 .....................................................
@ P6 .....................................................
..............................................................
168
14
18
P 400
$400
= $.381 per lb .
1,050 lbs .
Standard materials costs
$400
=
= $.40 per lb . cost per unit of output
Standard output
1,000 lbs .
Problem 3-L
1. The materials mix variance equals the actual total quantity used times the difference between the budgeted weightedaverage standard unit cost for the budgeted mix and the budgeted weighted average standard unit cost for the actual mix.
This variance is favorable if the standard weighted average cost for the actual mix is less than the standard weightedaverage cost for the budgeted mix. The standard mix weighted-average standard unit cost id P225 per liter (P135 standard
total cost / 600 liters).
The standard cost of the actual quantity used was P18,606 (see below). Thus the actual mix weighted-average standard unit
cost was P0.220398 (P18,606/84,420 liters used), and the mix variance was P388.50 favorable. [(0.220398 – P.225) x 84,420
liters].
P.200 x 26,600 = P5,320.00
.425 x 12,880 =
5,474.00
.150 x 37,800 =
5,670.00
.300 x 7,140 =
2,142.00
P18,606.00
2.
The materials yield variance equals the difference between the actual input and the standard input allowed for the actual
output, times the budgeted weighted average standard cost per input unit at the standard mix. The standard input for the
actual output was 84,000 liters (140 batches x 600 liters per batch). The standard mix budgeted weighted – average
standard unit cost is P225 per liter (135 total cost / 600 liters). Thus, the yield variance is P94.50 unfavorable [(84,420 liters
used – 84,000 liters allowed) x P.225].
Problem 3-M
1. Ideal standards are not necessarily unethical. They may be used unethically, such as in the case in which employees
are denied bonuses or other rewards because of not meeting a standard which was out of their reach. If they are
used as a guide to maximum attainable performance, however, and not tied directly to the reward system, they may
be ethical.
2. It is unethical for Lor Reyne simply to refuse to accept a particular standard. However, if the company intends to use
the standard unethically, she may refuse to hold her workers accountable while she pursues a permanent
disposition of the matter. If she simply refuses to accept it, she may be indirectly sabotaging the company by
hindering it from accomplishing its legitimate objectives. This would be unethical.
MCQ- Review Questions
1. D
2. B
3. A
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
B
B
C
C
D
E
B
A
D
D
A
B
C
A
C
C
B
D
A
A
D
B
B
C
A
B
D