Cost Accounting

Fitzhugh Company
1. Refer to Fitzhugh Company. Compute the material purchase price and quantity variances.
Material price variance:
100,000 ´ $2.50 = $250,000
100,000 ´ $2.60 =  260,000
$ 10,000 F

Material quantity variance:

95,625 ´ $2.60 = $248,625
89,250 ´ $2.60 =  232,050
$ 16,575 U
DIF: Moderate OBJ: 7-3

2. Refer to Fitzhugh Company. Compute the labor rate and efficiency variances.
Labor rate variance:
122,400 ´ $8.35 = $1,022,040
122,400 ´ $8.50 =  1,040,400
$ 18,360 F

Labor efficiency variance:

122,400 ´ $8.50 = $1,040,400
127,500 ´ $8.50 =  1,083,750
$ 43,350 F

DIF: Moderate OBJ: 7-3

Taylor Company
3. Refer to Taylor Company. Compute all the appropriate variances using the two-variance
approach.
Actual ($6,400 + $17,500) $23,900
 Budget Variance: $240 U
BFOH (8,900 ´ $1.90) $16,910
VOH (1,800 ´ 5 ´ $.75)   6,750 $23,660
Volume Variance: $190 F
Applied OH:
(1,800 ´ 5 ´ $2.65) $23,850
DIF: Moderate OBJ: 7-3
4. Refer to Taylor Company. Compute all the appropriate variances using the four-variance
approach.
Actual VOH $6,400
Variable Spending Variance: $275 F
Flex. Bud. Based on Actual
Input Hours (8,900 ´ $.75) $6,675
Variable Efficiency Variance: $75 F
Applied VOH
(1,800 ´ 5 ´ $.75) $6,750
Actual FOH $17,500
FOH Spending Variance: $590 U
BUDGETED FOH $16,910
FOH Volume Variance: $190 F
Applied FOH
(1,800 ´ 5 ´ $1.90) $17,100
DIF: Moderate OBJ: 7-3
5. Refer to Taylor Company. Compute all the appropriate variances using the three-variance
approach.
Actual $23,900
Spending Variance: $315 U
Flexible Budget Based on Actual Input
BFOH $16,910
VOH (8,900 ´ $.75)   6,675 $23,585
Efficiency Variance: $75 F
Flexible Budget Based on Standard DLHs
BFOH $16,910
VOH (1,800 ´ 5 ´ $.75)   6,750 $23,660
Volume Variance: $190 F
Applied OH:
(1,800 ´ 5 ´ $2.65) $23,850

DIF: Moderate OBJ: 7-3

6. Michigan Company
a. actual material cost $314,000
actual pieces at standard cost (80,000 ´ $4)  320,000
material purchase price variance $ 6,000 F

b. 3,900 units ´ 20 pieces per unit = 78,000 standard quantity allowed

c. total standard cost of material (78,000 ´ $4) $312,000

d. standard cost of actual material used

$312,000 + $6,400 U quantity variance $318,400
$318,400 ÷ $4 = 79,600 actual pieces used

e. actual labor cost $ 40,120

5,900 actual DLHs ´ $6   35,400
labor rate variance $ 4,720 U

f. 3,900 units ´ 1.5 standard hours per unit 5,850 SHA

g. 5,850 SHA ´ $6 $ 35,100

h. actual hours ´ standard rate (from e) $ 35,400

standard cost of labor allowed (from g)   35,100
 labor efficiency variance $ 300 U

i. actual machine hours ´ standard VOH rate (18,900 ´ $2.50) $ 47,250

VOH spending variance       50 U
actual VOH $ 47,300

j. 3,900 units ´ 4.8 standard hours per unit = 18,720 MH

allowed

k. standard hours allowed (from j) ´ standard VOH rate

(18,720 ´ $2.50) $ 46,800
actual machine hours ´ standard rate (from i)
(18,900 ´ $2.50)   47,250
variable overhead efficiency variance $    450 U

l. 19,000 machine hours ´ $3 $ 57,000

m. 3,900 units ´ 4.8 hours per unit ´ $3.00 $ 56,160

n. actual fixed overhead $ 60,000

budgeted fixed overhead (from l)   57,000
fixed overhead spending variance $ 3,000 U

o. budgeted fixed overhead (from l) $ 57,000

applied fixed overhead (from m)   56,160
volume variance $    840 U

p. total actual overhead $107,300

[$60,000 + $47,300 (from i)]
total applied overhead (18,720 SHA ´ $5.50)  102,960
Total overhead variance $ 4,340 U
DIF: Difficult OBJ: 7-3
Whitestone Company
7. Refer to Whitestone Company. Compute the material price, mix, and yield variances.
(round to the nearest dollar).
Standard: X 3.0/7.5 = 40%
Y 4.5/7.5 = 60%
Actual:
X 3.6 ´ 45,750 ´ $4.00 = $ 658,800
Y 4.4 ´ 45,750 ´ $3.25 =    654,225
$1,313,025
$43,005 F price
Actual ´ Standard Prices:
X 3.6 ´ 45,750 ´ $4.20 = $ 691,740
Y 4.4 ´ 45,750 ´ $3.30 =    664,290
$1,356,030
$16,470 U mix
Standard Qty. ´ Actual Mix ´ Standard Prices:
X 40% ´ 366,000* ´ $4.20 = $ 614,880
Y 60% ´ 366,000 ´ $3.30 =    724,680
$1,339,560 $83,722 U yield
Standard ´ Standard:
X 40% ´ 343,125** ´ $4.20 = $ 576,450
Y 60% ´ 343,125 ´ $3.30 =    679,388
$1,255,838

*(45,750 ´ 8 = 366,000)

**(45,750 ´ 7.5 = 343,125)

DIF: Difficult OBJ: 7-6

8. Refer to Whitestone Company. Compute the labor rate, mix, and yield variances (round
to the nearest dollar).
 Standard: S 3/10 = 30% Actual: S 3.8/9.5 = 40%
US 7/10 = 70% US 5.7/9.5 = 60%
Actual ´ Actual Prices:
S 3.8 ´ 45,750 ´ $10.60 = $1,842,810
US 5.7 ´ 45,750 ´ $7.80 =  2,034,045
$3,876,855
$34,770 F rate
Actual ´ Standard Prices:
S 3.8 ´ 45,750 ´ $10.50 = $1,825,425
US 5.7 ´ 45,750 ´ $ 8.00 =  2,086,200
$3,911,625
$108,656 U mix
Standard Qty. ´ Actual Mix ´ Standard Prices:
S 30% ´ 434,625* ´ $10.50 = $1,369,069
US 70% ´ 434,625 ´ $ 8.00 =  2,433,900
$3,802,969
$200,156 F yield
Standard ´ Standard:
S 30% ´ 457,500** ´ $10.50 = $1,441,125
US 70% ´ 457,500 ´ $ 8.00 =  2,562,000
$4,003,125
*(45,750 ´ 9.5 = 434,625)

**(45,750 ´ 10 = 457,500)

DIF: Difficult OBJ: 7-6

Peoria Corporation
9. Material Price Variance
MATERIAL A ($5.15 - 5.00) ´ 40 = $6 U
MATERIAL B ($6.00 - 6.00) ´ 50 = 0
MATERIAL C ($2.80 - 3.00) ´ 65 =  13 F
 $7 F

MIX VARIANCE YIELD VARIANCE

A 40 ´ $5 = $200 51 2/3 ´ $5 = $258.33 50 ´ $5 = $250
B 50 ´ $6 = $300 41 1/3 ´ $6 = $248.00 40 ´ $6 = $240
C 65 ´ $3 = $195     62 ´ $3 = $186.00 60 ´ $3 = $180
         $695              $692.33          $670

$2.67 UNF         $22.33 UNF

DIF: Moderate OBJ: 7-6
Sparkle Company
10. Determine the following:

a. fixed overhead budgeted for a year

$3 ´ 10,000 ´ 12 = $360,000
b. the number of units completed during January assuming no work in process at January 31

$6,000/$3 = 2,000 under 10,000 - 2,000 = 8,000 units

c. debits made to the Work in Process account for direct material, direct labor, and manufacturing
overhead

DM = 8,000 ´ $10 = $80,000, DL = 8,000 ´ $3 = $24,000,

MOH = 8,000 ´ $5 = $40,000
d. number of pieces of material issued during January

STD Q = 40,000 (X - 40,000) ´ $2 = $4,000 unit, X = 42,000 pieces issued

e. total of direct labor payroll recorded for January

$24,000 + $800 + $300 = $25,100

f. total of manufacturing overhead recorded in January.

$40,000 + $6,000 + $1,000 = $47,000

DIF: Moderate OBJ: 7-3