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REVIEW 12-14

(a)

TLV = (AH AR) (SHA SR)

TLV = (4,100 $14.40) ((2,000 2) $14.00) = $59,040 $56,000 = $3,040 U

Labour Price Variance

Direct Labour

(hours)

Actual

Hours

4,100

$59,040

Actual

Rate

$14.40

Actual

Hours

4,100

Standard

Rate

$14.00

$57,400

$1,640 U

Labour Quantity Variance

Direct Labour

(hours)

Standard

Actual

Quantity

Price

4,100

$14.00

$57,400

Standard Standard

Quantity

Price

4,000

$14.00

$56,000

$1,400 U

(b)

Total overhead variance = $81,300 $84,000* = $2,700 Favourable

*4,000 hours X $21.00

EXERCISE 12-28

(a) (1)

Total actual overhead cost

Overhead

Budgeted

Overhead

Budget

Variance

= ($16,000 + $11,500) +

$1,500

= $29,000

(2) Actual variable overhead cost= Actual Overhead Fixed Overhead

= $29,000 $12,000

= $17,000

(3) Variable overhead cost

applied

(5) Overhead volume variance

Normal

Fixed

Overhead X Capacity

Hours

Rate

$5

(2,300*

Standard

Hours

Allowed

2,000)

= $1,500 U

*$11,500 $5 per hour = 2,300 hours

(b)

Standard hours per application

= 2,000 2

= 1,000 loans processed

PROBLEM 12-40A

(a)

Number of units = $405,000 $18.00 (6 kg $3 per kg) = 22,500

(b)

AQ = ($405,000 + $9,000) $3.00 per kg = 138,000 kilograms

(c)

AP = [(138,000 $3) $6,900] = $407,100 138,000 kg = $2.95/kg

(d)

AH = ($90,000 + $7,000) $5.00/hr = 19,400 hours

(e)

AP = [(19,400 $5) + $4,850] = $101,850 19,400 hr = $5.25/hr

(f)

Actual variable overhead cost = (19,400 $3) $1,300 = $56,900

(g)

variance

Master Budgeted fixed cost = $126,000 + $14,000 = $140,000

(h)

Master budget hours = $140,000 $7.00 = 20,000 hours

Note: This question might be less challenging if you use the matrix as

show on the next page. Start by filling in all the numbers you know, and

then break each one into its components using the information from the

standard cost card. This works well for materials and labour, but is less

effective for overhead variances.

Materials Variance Matrix

(1)

(2)

(3)

Actual Quantity

Actual Price

138,000 $2.95 =

$407,100

Actual Quantity

Standard Price

138,000 $3 = $414,000

Standard Quantity

Standard Price

22,500 6 $3 =

$405,000

Price Variance

(1) (2)

$6,900 F

Quantity Variance

(2) (3)

$9,000 U

Total Variance

(1) (3)

$2,100 U

(1)

(2)

(3)

Actual Hours

Actual Rate

19,400 $5.25 = $101,850

Actual Hours

Standard Rate

19,400 $5 = $97,000

Standard Hours

Standard Rate

22,500 0.8 $5 =

$90,000

Price Variance

(1) (2)

$4,850 U

Quantity Variance

(2) (3)

$7,000 U

Total Variance

(1) (3)

$11,850 U

PROBLEM 12-41A

(a) See below for the solution using formulas.

Material Variances

Price Variance

Quantity Variance

(AQ AP)

(AQ SP)

(SQA SP)

20,500 $4.90

20,500 $5.00

19,600 $5.00

$100,450

$102,500

$98,000

$2,050 F

$4,500 U

$2,450 U

Total Material Variance

Labour Variances

Price Variance

Quantity Variance

(AH AR)

(AH SR)

(SHA SR)

19,600 $12.20

19,600 $12.00

19,600 $12.00

$239,120

$235,200

$235,200

$3,920 U

$0

$3,920 U

Total Labour Variance

Actual per unit materials cost: $100,450 20,500 kg = $4.90/kg (AP)

Standard quantity of materials: 9,800 units 2 kg = 19,600 kg (SQ)

Actual per unit direct labour cost: $239,120 19,600 = $12.20 (AR)

Standard quantity of labour: 9,800 2 hours = 19,600 hours (SH)

(20,500 $4.90) (19,600 $5.00)

$100,450 $98,000 =

$2,450 U

(20,500 $4.90) (20,500 $5.00)

$100,450 $102,500 =

$2,050 F

Materials quantity variance = (AQSP) (SQ SP)

(20,500 $5.00) (19,600 $5.00)

$102,500 $98,000 =

$4,500 U

Total labour variance = (AHAR) (SHSR)

(19,600 $12.20) (19,600 $12.00)

$239,120 $235,200 =

$3,920 U

(19,600 $12.20) (19,600 $12.00)

$239,120 $235,200 =

$3,920 U

(19,600 $12.00) (19,600 $12.00)

$235,200 $235,200 =

Total variable applied overhead: 19,600 $4.00 = $78,400

Total fixed applied overhead: 19,600 $3.00 = $58,800

Total overhead variance = Actual Overhead Overhead Applied

$137,300 (19,600 $7.00)

$137,300 $137,200 =

$100 U

(c) Overhead budget variance = Actual O.H. Budgeted O.H.

($137,300) (19,600 $4.00) + (20,000 $3.00) =

$1,10

0

Fixed Overhead Rate (Normal capacity Standard Hours Allowed)

$3.00 (20,000 19,600) =

$1,200 U

PROBLEM 12-45A

(a)

AQ ($0.99 $1.00) = 600

Actual quantity = $600 $0.01 = 60,000 litres

(b)

$1,600 = $1.00 [AQ (5,000 20)]

Actual quantity used = (5,000 20) + 1,600 = 101,600

(c)

$7,400 = AH ($10.50 $10.00)

Actual hours worked = $7,400 $0.50 = 14,800 hours

(d)

= $10.00 [14,800 (5,000 3)] = $2,000F

(e)

= [$(750,000 50,000) 3] (14,800 15,000)

= ($15.00 per unit 3 hours per unit) (200 hours)

= $5.00 (200) = $1,000 F

(f)

spending variance

= (14,800 $5.00) + $1,800 = $75,800

(g)

overhead

= $88,000 ($1,050,000 12) = $88,000 $87,500 = $500 U

(h)

overhead rate)

= $87,500 [15,000 (($1,050,000 50,000) 3)]

= $87,500 (15,000 $7.00) = $17,500F

PROBLEM 12-48A

Budgeted variable overhead is $135,000 0.80 = $108,000

The fixed overhead rate is $27,000 (9,000 2) = $1.50/hour

The variable overhead rate is $108,000 (9,000 2) = $6.00/hour

(a) Variable overhead spending variance =

Actual Overhead (Actual hours variable overhead rate)

= $108,500 (17,200 $6.00)

= $108,500 $103,200 = $5,300 U

(b)

(Actual hours Standard hours allowed)

= $6.00 [17,200 (8,500 2)] = $1,200 U

(c)

overhead

= $28,000 [(9,000 2) $1.50] = $28,000 $27,000 = $1,000 U

(d)

(Normal capacity Standard hours allowed)

= $1.50 [18,000 (8,500 2)] = $1,500 U

PROBLEM 12-54B

Blue numbers are calculated.

1, 2, 3 etc

Chronological order for calculations (see below)

Material Price Variance

(AQ AP)

(AQ SP)

20,000 $0.60

20,000

$0.613

$12,0001

$12,2002

$200 F

Material Quantity Variance

(AQ SP)

(SQA SP)

15,000 $0.61

16,0006

$0.61

4

5

$9,150

$9,760

$610 F

Labour Variances

Price Variance

Quantity Variance

(AH AR)

(AH SR)

(SHA SR)

7,3001

2

7,5007 $4.80

7,500 $5.00

$5.00

8

$36,000

$37,500

$36,50011

$1,500 F9

$1,000 U10

$500 F

Total Labour Variance

Variable Overhead Variances

Spending Variance

Efficiency Variance

(AH AR)

(AH PDOHR)

(SHA PDOHR)

Actual

7,500

$0.95

7,300

$0.95

$8,00017

$7,12514

$6,93513

$875 U16

$190 U15

$1,065 U

Total Variable Overhead Variance

Fixed Overhead Variances

Budget Variance

Volume Variance

Actual

Static budget

(SHA PDOHR)

10,000

$0.60

7,300

$0.60

22

19

18

$6,429

$6,000

$4,380

$429 U21

$1,620 U20

$2,049 U

Total Fixed Overhead Variance

Calculations:

Direct materials price variance (given)

Direct materials quantity variance (given)

Direct labour price variance:

7

$36,000 $4.80 = 7,500 hours

9

7,500 ($4.80 $5.00) =

Direct labour quantity variance:

Total variance price variance =

10

$500F $1,500F =

PROBLEM 12-54B (Continued)

$200 F

$610 F

$1,500 F

$1,000 U

$190 U

15

Because overhead is applied using direct labour hours, the standard

quantity for variable overhead efficiency variance will be the same as

for direct labour hours. The labour quantity variance is $1,000 and the

rate was $5.00 per hour; this represents 200 standard hours ($1,000

$5.00 per hour). The variable overhead efficiency variance = 200 hours

VOH rate. The VOH rate = $9,500 10,000 hours or $0.95 per direct

labour hour.

16

$875 U

Total variable overhead variance is represented by over- or underapplied overhead. Spending variance = under-applied overhead

variable overhead efficiency variance, or $1,065U $190U.

Fixed overhead volume variance:

Overhead rate = $1.55 $0.95 = $0.60

Actual quantity of hours = 7,500

Standard number of hours = 7,500 200

Normal capacity = 10,000

20

$0.60 (10,000 7,300) =

Fixed overhead budget variance:

21

($2,256 U $1,065 U) $1,620 U =

Total fixed overhead variance:

($1,620 U $492 F) =

$1,620 U

$429 F

$1,191 U

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