PROBLEMSETC

PROBLEM241C
PhillyCompanysetthefollowingstandardunitcostsforitssingleproduct:
Directmaterial(10lbs.@$2perlb.)
$20.00
Directlabor(2hrs.@$11perhr.)
22.00
FactoryoverheadVariable(2hrs.@$5perhr.)10.00
FactoryoverheadFixed(2hrs.@$22.50perhr.)45.00
Totalstandardcost
$97
.00
The predetermined overhead rate is based on a planned operating volume of 75% of the
productivecapacityof80,000unitsperquarter.Thefollowingflexiblebudgetinformationis
available:
OperatingLevels
50% 75%
100%
Productioninunits
40,00060,00080,000
Standarddirectlaborhrs.800,000120,000160,000
Budgetedoverhead
Fixedfactoryoverhead $2,700,000$2,700,000 $2,700,000
Variablefactoryoverhead$400,000$600,000 $800,000
Duringthecurrentquarter,thecompanyoperatedat100%ofcapacityandproduced80,000units
ofproduct;actualdirectlabortotaled300,000hours.Unitsproducedareassignedthefollowing
standardcosts:
Directmaterials(800,000lbs.@$2perlb.)$1,600,000
Directlabor(160,000hrs.@$11perhr.)
1,760,000
Factoryoverhead(160,000hrs.@$25perhr.)
4,000,000
Totalstandardcost
$7,360,000
Actualcostsincurredduringthecurrentquarterfollow:
Directmaterials(790,000lbs.@$2.20)
$1,738,000
Directlabor(150,000hrs.@$11.50) 1,725,000
Fixedfactoryoverheadcosts
2,752,000
Variablefactoryoverheadcosts
850,000
Totalactualcosts
$7,065,000
Required
1.Computethedirectmaterialscostvariance,includingitspriceandquantityvariances.
2.Computethedirectlaborvariance,includingitsrateandefficiencyvariances.
3.Compute(a)thevariableoverheadspendingandefficiencyvariances,(b)thefixedoverhead
spendingandvolumevariances,and(c)thetotaloverheadcontrollablevariance.

PROBLEM242C
Douglas Publishing Companys 2008 master budget included the following fixed budget
performancereport.Itisbasedonexpectedproductionandsalesvolumeof11,000units.
DOUGLASPUBLISHINGCOMPANY
FixedBudgetPerformanceReport
ForYearEndedDecember31,2008
Sales
$1,265,000
Costofgoodssold
Directmaterials
$352,000
Directlabor
209,000
Repairs(variablecost)
38,500
DepreciationEquipment
75,000
Utilities($1perunitisvariable)
31,000
Plantmanagementsalaries
95,000800,500
Grossprofit
$464,500
Sellingexpenses
Packaging
22,000
Shipping
5,500
Salescommissions
55,000
82,500
Generalandadministrativeexpenses
Advertisingexpense
49,000
Salaries
195,000

244,000
Incomefromoperations
$138,000

Required
1.Classifyallitemslistedinthefixedbudgetaseithervariableorfixed.Alsodeterminetheir
amountsperunitortheiramountsfortheyear,asappropriate.
2.Prepareflexiblebudgets(seeExhibit24.3)forthecompanyatsalesvolumesof9,000and
15,000units.
3.Thecompanysbusinessconditionsareimproving.Onepossibleresultisasalesvolumeof
approximately20,000units.Thecompanypresidentisconfidentthatthisvolumeiswithinthe
relevantrangeofexistingcapacity.Howmuchwilloperatingincomeincreaseoverthe2008
budgetedamountof$138,000ifthislevelisreachedwithoutincreasingcapacity.
4.Anunfavorablechangeinbusinessisremotelypossible:inthiscase,productionandsales
volumefor2005couldfallto5,000units.Howmuchincome(orloss)fromoperationswould
occurifsalesvolumefallstothislevel?

PROBLEM243C
RefertoinformationinProblem242C.DouglasPublishingCompanysactualincomestatement
for2008follows:
DOUGLASPUBLISHINGCOMPANY
StatementofIncomefromOperations
ForYearEndedDecember31,2008
Sales(15,000units)
$1,693,000
Costofgoodssold
Directmaterials
$590,000
Directlabor
255,000
Repairs(variablecost)
135,000
DepreciationEquipment
75,000
Utilities(fixedcostis$1perunit)
33,000
Plantmanagementsalaries
95,000

1,183,000
Grossprofit
$1,411,500
Sellingexpenses
Packaging
33,000
Shipping
9,500
Salescommissions
75,000 117,500

Generalandadministrativeexpenses
Advertisingexpense
149,000
Salaries
182,000

331,000
Incomefromoperations
$
61,500
Required
1.Prepareaflexiblebudgetperformancereportfor2008.
AnalysisComponent
2.Analyzeandinterpretboththe(a)salesvarianceand(b)directmaterialsvariance.
PROBLEM244C
SVCInc.hassetthefollowingstandardcostsforoneunitofitsproduct:

Directmaterial(5lbs@$2perlb) $10.00
Directlabor(3hrs.@$15perhr.) 45.00
Overhead(3hrs.@$33perhr.)
99.00
Totalstandardcost
$154.00
Thepredeterminedoverheadrate($33perdirectlaborhour)isbasedonanexpectedvolumeof
60%ofthefactoryscapacityof12,000unitspermonth.Followingarethecompanysbudgeted
overheadcostspermonthatthe60%level:
OverheadBudget(60%capacity)
Variableoverheadcosts
Indirectmaterials
$57,000
Indirectlabor
160,000
Power
95,000
Repairsandmaintenance
120,000
Totalvariableoverheadcosts
$432,000
Fixedoverheadcosts
DepreciationBuilding
30,000
DepreciationMachinery
75,000
Taxesandinsurance
36,000
Supervision
139,800
Totalfixedoverheadcosts
280,800

Totaloverheadcosts
$712,800
Thecompanyincurredthefollowingactualcostswhenitoperatedat60%ofcapacityinOctober:
Directmaterials(38,000lbs.@$2.25perlb.)
$85,500
Directlabor(20,700hrs.@$14perhr.)
289,800
Overheadcosts
Indirectmaterials
$58,300
Indirectlabor
151,000
Power
107,000
Repairsandmaintenance
94,000
DepreciationBuilding
30,000
DepreciationMachinery
75,000
Taxesandinsurance
37,800
Supervision
161,000
714,100
Totalcosts
$1,089,400
Required
1.Examinethemonthlyoverheadbudgetto(a)determinethecostsperunitforeachvariable
overheaditemanditstotalperunitcosts,and(b)identifythetotalfixedcostspermonth.
2.Prepareflexibleoverheadbudgets(asinExhibit24.12)forOctobershowingtheamountsof
eachvariableandfixedcostatthe50%,60%,and70%capacitylevels.

3.Computethedirectmaterialscostvariance,includingitspriceandquantityvariances.
4.Computethedirectlaborcostvariance,includingitsrateandefficiencyvariances.
5.Compute the (a) variable overhead spending and efficiency variances, (b) fixed overhead
spendingandvolumevariances,and(c)totaloverheadcontrollablevariance.
6.Prepareadetailedoverheadvariancereport(asinExhibit24.19)thatshowsthevariancesfor
individualitemsofoverhead.
PROBLEM245C
The Johnson Company has set the following standard costs per unit for the product it
manufactures:
Directmaterial(10lbs.@$3perlb.) $30.00
Directlabor(1hrs.@$17perhr.)
17.00
Overhead(1hrs.@$6perhr.)
6

.00
Totalstandardcost
$53

.00
The predetermined overhead rate is based on a planned operating volume of 100% of the
productivecapacityof15,000unitspermonth.Thefollowingflexiblebudgetinformationis
available:

Productioninunits
Standarddirectlaborhours
Budgetedoverhead
Variableoverheadcosts
Indirectmaterials
Indirectlabor
Power
Maintenance
Totalvariablecosts
Fixedoverheadcosts
Rentoffactorybuilding
DepreciationMachinery
Supervisorysalaries
Totalfixedcosts
Totaloverheadcosts

OperatingLevels
70%
80% 90%
10,500 12,000 13,500
10,500 12,000 13,500
$4,200 $4,800 $5,400
21,000 24,000 27,000
6,300 7,200 8,100
1,050

1,200

1,350
$32,550 $37,200 $41,850
$20,000 $20,000 $20,000
5,500 5,500 5,500
18,000

18,000

18,000

$43,500 $43,500 $43,500

$76,050 $80,700 $85,350

DuringMayofthisyear,thecompanyoperatedat80%ofcapacityandproduced12,000units,
incurringthefollowingactualcosts:
Directmaterials(111,000lbs.@$3.20perlb.)$355,200
Directlabor(12,650hrs.@$18.00perhr.)227,700
Overheadcosts

Indirectmaterials
Indirectlabor
Power
Maintenance
Rentoffactorybuilding
DepreciationMachinery
Supervisorysalaries
Totalcosts

$5,000
25,040
7,800
1,060
20,000
5,500
19,10083,500
$666,400

Required
1.Computethedirectmaterialsvariance,includingitspriceandquantityvariances.
2.Computethedirectlaborvariance,includingitsrateandefficiencyvariances.
3.Compute(a)thevariableoverheadspendingandefficiencyvariances,(b)thefixedoverhead
spendingandvolumevariances,and(c)thetotaloverheadcontrollablevariance.
4.Prepareadetailedoverheadvariancereport(asinExhibit24.19)thatshowsthevariancesfor
individualitemsofoverhead.
PROBLEM246C
HughesCompanysstandardcostaccountingsystemrecordedthefollowinginformationfromits
Decemberoperations:
Standarddirectmaterialscost$287,000
Directmaterialsquantityvariance(unfavorable)8,600
Directmaterialspricevariance(unfavorable)
2,000
Actualdirectlaborcost
522,300
Directlaborefficiencyvariance(unfavorable)4,400
Directlaborratevariance(favorable) 10,600
Actualoverheadcost
110,000
Volumevariance(unfavorable)
3,000
Controllablevariance(favorable)
1,500
Required
1.PrepareDecember 30journal entries torecordthecompanys costsandvariances forthe
month.
AnalysisComponent
2.Identifytheareasthatwouldattract theattention ofamanagerwhousesmanagementby
exception.Explainwhataction(s)themanagershouldconsider.