Quick Study 21-3 (5 minutes)

Actual cost for one bat ......................................................................

Standard cost for one bat (from QS 21-2) ........................................
Cost variance ......................................................................................

$40
33
$ 7

As the actual costs are greater than the standard costs, the cost variance is
unfavorable.

Quick Study 21-5 (10 minutes)

Standard direct materials cost .......................................................... $150,000
Materials price variance (favorable) .................................................

(12,000)

Materials quantity variance (favorable) ............................................

(2,000)

Actual total direct materials cost ...................................................... $136,000

Quick Study 21-6 (10 minutes)
Standard direct labor cost ................................................................. $400,000
Labor rate variance (unfavorable) ....................................................
20,000
Labor efficiency variance (unfavorable) ..........................................
10,000
Actual total direct labor cost ............................................................. $430,000

Quick Study 21-7 (15 minutes)

Following information is given
Actual price per pound ................................................................................
$ 78.00
Standard price per pound ............................................................................77.50
Material price variance per pound (unfavorable) ......................................
$ 0.50
It is also known that:
Material price variance

= Price variance per pound x Actual pounds used

Actual pounds used

= Material price variance / Price variance per pound

Therefore, substituting with the information given above:

Actual pounds used

= $4,000 / $0.50
= 8,000 pounds

Quick Study 21-16 (10 minutes)

Direct materials price variance:
Actual cost of direct materials used (given) ..............................................
$535,000
Actual quantity used x Standard price (300,000 x $2) ..............................
600,000
Direct materials price variance (favorable) ................................................
$ 65,000
Direct materials quantity variance:
Actual quantity used x Standard price (300,000 x $2) ..............................
$600,000
Standard quantity x Standard price (60,000 x 4 x $2) ...............................
480,000
Direct materials quantity variance (unfavorable) ......................................
$120,000

Quick Study 21-17 (10 minutes)

Direct labor rate variance:
Actual hours x Actual rate per hour (65,000 x $15) ...................................
$975,000
Actual hours x Standard rate per hour (65,000 x $14) ..............................
910,000
Direct labor rate variance (unfavorable) ....................................................
$ 65,000

Direct labor efficiency variance:

Actual hours x Standard rate per hour (65,000 x $14) ..............................
$910,000
Standard hours x Standard rate per hour (67,000 x $14) .........................
938,000
Direct labor efficiency variance (favorable) ...............................................
$ 28,000

Exercise 21-16 (25 minutes)

Part 1
Direct materials price variance:
Actual cost of direct materials used (16,000 x $4.05) ...............................
$ 64,800
Actual quantity used x Standard price (16,000 x $4.00) ...........................
64,000
Direct materials price variance (unfavorable) ...........................................
$
800
Direct materials quantity variance:
Actual quantity used x Standard price (16,000 x $4.00) ...........................
$ 64,000
Standard quantity x Standard price (15,000* x $4.00) ...............................
60,000
Direct materials quantity variance (unfavorable) ......................................
$ 4,000
*30,000 units x pound per unit = 15,000 pounds

Part 2
Direct labor rate variance:
Actual hours x Actual rate per hour (5,545 x $19.00***) ...........................
$105,355
Actual hours x Standard rate per hour (5,545 x $20.00) ...........................
110,900
Direct labor rate variance (favorable) .........................................................
$ 5,545
Direct labor efficiency variance:
Actual hours x Standard rate per hour (5,545 x $20.00) ...........................
$110,900
Standard hours x Standard rate per hour (5,000** x $20.00) ....................
100,000
Direct labor efficiency variance (unfavorable) ..........................................
$ 10,900
**30,000 units x 1/6 hour per unit = 5,000 hours
***$105,355/5,545 hours

PROBLEM SET B
Problem 21-1B (50 minutes)
Part 1 Direct Materials Variances
Direct materials cost variances
Actual units at actual cost [1,000,000 lbs. @ $4.25] ..........................................
$4,250,000
Standard units at standard cost [1,050,000 lbs. @ $4.00] .................................
4,200,000
Direct material cost variance ..............................................................................
$ 50,000 U

Direct Materials Price and Quantity Variances

Actual Cost
Standard Cost
AQ x AP
AQ x SP
SQ x SP
1,000,000 x $4.25

1,000,000 x $4.00

$4,250,000

$4,000,000
$250,000 U
(Price variance)

1,050,000 x $4.00
$4,200,000

$200,000 F
(Quantity variance)

$50,000 U
(Total materials variance)

Part 2 Direct Labor Variances

Direct labor cost variances
Actual units at actual cost [250,000 hrs. @ $7.75] .............................................
$1,937,500
Standard units at standard cost [252,000 hrs. @ $8.00] ...................................
2,016,000
Direct labor cost variance ...................................................................................
$ 78,500 F

Direct Labor Rate and Efficiency Variances

Actual Cost
Standard Cost
AH x AR
AH x SR
SH x SR
250,000 x $7.75

250,000 x $8.00

$1,937,500

$2,000,000
$62,500 F
(Rate variance)

252,000 x $8.00
$2,016,000

$16,000 F
(Efficiency variance)

$78,500 F
(Total labor variance)

Problem 21-1B (Continued)

Part 3 Overhead Variances
Overhead controllable variance
Actual overhead incurred [$1,960,000 + $1,200,000] ...............
$ 3,160,000
Budgeted overhead [from flexible budget] ...............................
3,276,000
Controllable overhead cost variance ........................................
$
116,000 F

Fixed overhead volume variance

Budgeted fixed overhead cost [at 80% capacity] .....................
$ 2,016,000
Fixed overhead cost applied [252,000 hrs. @ $7] ....................
1,764,000
Fixed overhead cost variance ....................................................
$
252,000 U

Problem 21-5B (60 minutes)

Part 1
Variable or Fixed Classification

Per Unit
Amount

Variable costs (total divided by 15,000 units)

Indirect materials

$ 1.50

Indirect labor

6.00

Power

1.50

Repairs and maintenance

3.00

Total variable costs

$12.00

Fixed costs (per month)

DepreciationBuilding

$ 24,000

DepreciationMachinery

72,000

Taxes and insurance

18,000

Supervision

66,000

Total fixed costs

$180,000

Problem 21-5B (Continued)

Part 2
SUNCOAST COMPANY
Flexible Overhead Budgets
For Month Ended December 31
Flexible Budget
Variable
Total
Amount
Fixed
per Unit
Cost

Flexible
Budget for
Unit Sales
of 13,000

Flexible
Budget for
Unit Sales
of 15,000

Flexible
Budget for
Unit Sales
of 17,000

Variable overhead costs

Indirect materials ....................
$ 1.50

$ 19,500

$ 22,500

$ 25,500

Indirect labor ........................... 6.00

78,000

90,000

102,000

Power ....................................... 1.50

19,500

22,500

25,500

Repairs and maintenance ...... 3.00

39,000

45,000

51,000

Total variable costs ................

$12.00

156,000

180,000

204,000

Fixed overhead costs

DepreciationBuilding ..........

$ 24,000

24,000

24,000

24,000

DepreciationMachinery.......

72,000

72,000

72,000

72,000

Taxes and insurance ..............

18,000

18,000

18,000

18,000

Supervision .............................

66,000

66,000

66,000

66,000

Total fixed costs .....................

$180,000

180,000

180,000

180,000

$336,000

$360,000

$384,000

Total overhead ..........................

Problem 21-5B (Continued)

Part 3

Direct Materials Variances

Preliminary computations
Actual material used:
Standard quantity of materials:
Actual price:
Standard price:

69,000 lbs. (given)

15,000 units x 4.5 lb./unit = 67,500 lb.
$6.10/lb. (given)
$6.00/lb. (given)

Direct material cost variances

Actual units at actual cost [69,000 lbs. @ $6.10] .......................... $420,900
Standard units at standard cost [67,500 lbs. @ $6.00] ................. 405,000
Direct material cost variance .......................................................... $ 15,900 U

Direct Materials Price and Quantity Variances

Actual Costs
Standard Costs
AQ x AP
AQ x SP
SQ x SP
69,000 x $6.10
lbs.
per lb.

69,000 x $6.00
lbs.
per lb.

67,500 x $6.00
lbs.
per lb.

$420,900

$414,000

$405,000

$ 6,900 U
(Price variance)

$9,000 U
(Quantity variance)

$15,900 U
(Total materials variance)
Alternate solution format
Price variance
=
=
=
=
Quantity variance

=
=
=
=

AQ x (AP - SP)
69,000 lb. x ($6.10 - $6.00) per lb.
69,000 lb. x ($0.10) per lb.
$ 6,900 U
(AQ SQ) x SP
(69,000 67,500) lb. x $6.00 per lb.
1,500 lb. x $6.00 per lb.
$ 9,000 U

Price variance ..................... $ 6,900 U

Quantity variance ...............
9,000 U
Total variance ..................... $15,900 U

Problem 21-5B (Continued)

Part 4

Direct labor variances

Preliminary computations
Actual hours used:
Standard hours:
Actual rate:
Standard rate:

22,800 hours (given)

15,000 units x 1.5 hrs./unit = 22,500 hours
$12.30/hr. (given)
$12.00/hr. (given)

Direct labor cost variances

Actual units at actual cost [22,800 hrs. @ $12.30] .............................................
$280,440
Standard units at standard cost [22,500 hrs. @ $12.00] ....................................
270,000
Direct labor cost variance ....................................................................................
$ 10,440 U

Direct Labor Rate and Efficiency Variances

Actual Costs
Standard Costs
AH x AR
AH x SR
SH x SR
22,800 x $12.30
hours
per hr.

22,800 x $12.00
hours
per hr.

$280,440

$273,600
$6,840 U
(Rate variance)

22,500 x $12.00
hours
per hr.
$270,000

$3,600 U
(Efficiency variance)

$10,440 U
(Total labor variance)

Alternate solution format

Rate variance
=
=
=
=
Efficiency variance

=
=
=
=

AH x (AR - SR)
22,800 hours x ($12.30 - $12.00) per hour
22,800 x $0.30 per hour
$ 6,840 U
(AH - SH) x SR
(22,800 22,500) hours x $12.00 per hour
300 hours x $12.00 per hour
$ 3,600 U

Rate variance ...................... $ 6,840 U

Efficiency variance .............
3,600 U
Total ..................................... $10,440 U

Problem 21-5B (Concluded)

Part 5
SUNCOAST COMPANY
Overhead Variance Report
For Month Ended December 31
Volume Variance
Expected production level .......................................................75% of capacity
Production level achieved .......................................................75% of capacity
Volume variance ....................................................................... 0

Controllable Variance

Flexible
Budget

Actual
Results

Variances*

Variable overhead costs

Indirect materials .....................................
$ 22,500

$ 21,600

$ 900 F

Indirect labor ............................................ 90,000

82,260

7,740 F

Power ........................................................ 22,500

23,100

600 U

Repairs and maintenance ....................... 45,000

46,800

1,800 U

Total variable costs .................................180,000

173,760

6,240 F

DepreciationBuilding ........................... 24,000

24,000

DepreciationMachinery ........................ 72,000

75,000

3,000 U

Taxes and insurance ............................... 18,000

16,500

1,500 F

Supervision .............................................. 66,000

66,000

Total fixed costs.......................................180,000

181,500

1,500 U

Total overhead costs .................................

$360,000

$355,260

$4,740 F

Fixed overhead costs

*F = Favorable variance; and U = Unfavorable variance