13-70 Fill in Missing Data
1.
Unit sales
Sales
Variable costs
Contribution margin
Fixed costs
Operating income
Actual
Results
1,200
$69,600
$56,800
$12,800
$7,000
$5,800
FlexibleBudget
Variance
-0$2,400U
$8,800U
$11,200U
$2,000U
$13,200U
Flexible
Budget
1,200
$72,000
$48,000
$24,000
$5,000
$19,000
Sales
Volume
Variance
200F
$12,000F
$8,000U
$4,000F
-0$4,000F
Master
(Static)
Budget
1,000
$60,000
$40,000
$20,000
$5,000
$15,000
a. - 0 b. 1,200 (by definition)
c. 1,200 - 1,000 = 200F
d. Budgeted selling price per unit: $60,000 ÷ 1,000 units = $60/unit
∴ Flexible-budget revenues = 1,200 units x $60/unit = $72,000
e. $69,600 - $72,000 = $2,400U
f. $72,000 - $60,000 = $12,000F
g. Standard (budgeted) variable cost per unit: $40,000 ÷ 1,000 units = $40/unit ∴
Flexible-budget variable cost: 1,200 units x $40 = $48,000
h. $48,000 - $40,000 = $8,000U
i.
$11,200U - (e) $2,400U = $8,800U
j.
(g) $48,000 + (i) $8,800 = $56,800
k. $69,600 - (j) $56,800 = $12,800
l.
$12,800 + $11,200 = $24,000 or, $72,000 - $48,000 = $24,000
m. $12,000F - $8,000U = $4,000F, or, Budgeted contribution margin per unit:
$60/unit - $40/unit = $20/unit; 200 units x $20/unit = $4,000F
n. $60,000 - $40,000 = $20,000 or, 1,000 units x $20/unit = $20,000
p. $12,800 – $5,800 = $7,000
q. - 0 - (by definition, as long as both output levels are within the relevant range)
r. $5,000 (= master budget amount, as long as both output levels are within the
relevant range)
1
13-70 (Continued)
s. $7,000 (p) - $5,000 (r) = $2,000U
t. $20,000 (n) - $5,000 = $15,000
u. $4,000F (m) -$0 (q) = $4,000F
v. $15,000 (t) + $4,000 (u) = $19,000, or, $24,000 (l) - $5,000 (r) = $19,000
w. $5,800 - $19,000 (v) = $13,200U, or, $11,200U + $2,000U (s) = $13,200U
2
13-72 Direct Labor Variances: Working Backwards
Actual Labor Cost
(AQ) x (AP)
Actual Quantity
at Standard Price
(AQ) x (SP)
Flexible Budget (FB)
Based on Outputs
(SQ) x (SP)
Actual Hrs.
Worked x Std.
Wage Rate/Hr.
Std. Hrs.
Allowed x Std.
Wage Rate/Hr.
Actual Hrs.
Worked x Actual
Wage Rate/Hr.
(1.16 x SQ) x (AP)
=?
(1.16 x SQ) x $30/hr.
=?
Labor Rate Variance
$11,600F
(SQ) x $30/hr.
=?
Labor Efficiency Variance
$24,000U
1. Efficiency variance = (AQ - SQ) x SP
$24,000 = (1.16 SQ - SQ) x $30/hr.
0.16 SQ = 800
∴ SQ = 5,000 hours
1.
AQ = 1.16 SQ = 1.16 x 5,000 hrs. = 5,800 hours
2.
Labor rate variance = (AP - SP) x AQ
- $11,600 = (AP - $30.00)/hr. x 5,800 hrs.
AP - $30.00 = - $2.00
∴ AP = $28.00/hr.
3. SQ = Number of units manufactured x Standard labor hours per unit
5,000 = Number of units manufactured x 2 hrs./unit
∴ Number of units manufactured = 5,000hrs./2hrs. per unit = 2,500 units
3
13-73 Summary Problem: All variances
1. a. Direct materials price variance (calculated at point of production):
Formula: AQ x (AP - SP), where AQ = units of raw material used in
production during the period
 Calculation of actual prices per unit of raw material =
Actual cost ÷ AQ
Housing units
$44,000 ÷ 2,200 = $20 per unit
Printed circuit boards
$75,200 ÷ 4,700 = $16 per unit
Reading heads
$101,200 ÷ 9,200 = $11 per unit
 Calculation of price variance:
Housing units
2,200 x ($20 – $20) =
$0
Printed circuit boards
4,700 x ($16 – $15) = 4,700U
Reading heads
9,200 x ($11 – $10) = 9,200U
Total direct materials price variance
$13,900U

b. Direct material usage variance:
Formula: SP x (AQ - SQ)
Calculation of standard quantities (SQ) = Units Produced x Standard
quantity of raw material inputs per unit of output:
Housing units
2,200 x 1 = 2,200 parts
Printed circuit boards
2,200 x 2 = 4,400 parts
Reading heads
2,200 x 4 = 8,800 parts
 Calculation of variance:
Housing units
$20 x (2,200 - 2,200) =
$
0
Printed circuit boards
$15 x (4,700 - 4,400) =
4,500U
Reading heads
$10 x (9,200 - 8,800) =
4,000U
Total direct materials quantity variance
$8,500U


1. c. Direct labor efficiency variance:
Formula: SP x (AQ - SQ)
Calculation of standard hours allowed for output achieved (SQ) =
Actual units of output x Standard labor hours per unit of output:
Assembly Group
2,200 x 2.0 =
4,400 hours
PCB Group
2,200 x 1.0 =
2,200 hours
RH Group
2,200 x 1.5 =
3,300 hours
 Calculation of labor efficiency variance:
Assembly Group
$10/hr. x (3,900 - 4,400) = $5,000F
PCB Group
$11/hr. x (2,400 - 2,200) = $2,200U
RH Group
$12/hr. x (3,500 - 3,300) = $2,400U
Total direct labor efficiency variance
$ 400F


4
13-73 (Continued-1)
d. Direct labor rate variance:
Formula: Total wages paid - (AQ x SP)
Calculation of labor rate variance:
Assembly Group
$31,200 - (3,900 x $10) =
PCB Group
$31,060 - (2,400 x $11) =
RH Group
$50,000 - (3,500 x $12) =
Total direct labor rate variance


$7,800F
$4,660U
$8,000U
$4,860U
e. Selling price variance:
Formula: Units sold x (AP - SP)
Calculate budgeted selling price per unit, SP:
Total budgeted sales ÷ Budgeted unit sales volume
$400,000 ÷ 2,000 units = $200 per unit
 Actual selling price per unit, AP:
Actual sales revenue ÷ Actual units sold
= $396,000 ÷ 2,200 = $180 per unit
Selling Price Variance = 2,200 units x ($180 - $200)/unit =
$44,000U


f. Sales volume variance, in terms of contribution margin:
 Formula: Budgeted cm/unit x (Actual Sales – Budgeted Sales)
 Calculate budgeted unit contribution margin:
Total budgeted contribution margin ÷ Budgeted units
$122,000 ÷ 2,000 = $61 per unit
Sales volume variance: $61/unit x (2,200 - 2,000) units = $12,200F
2. The unfavorable variance of $58,660 between budgeted and actual contribution margin
for Funtime, Inc. during May 2007 can be explained by aggregating the variances
calculated above in part (1):
Direct materials price variance
Direct materials usage variance
Direct labor efficiency variances
Direct labor rate variances
Selling price variance
Sales volume variance
Total contribution margin variance
5
$ 13,900U
8,500U
400F
4,860U
44,000U
12,200F
$58,660U