Managerial & Financial Accounting (ACCO 503)

Course Exam

Chapter 2: Job Order Costing

1. Larry’s Lawn Services provides custom landscaping for homes and businesses and uses job
order costing to capture the cost of its landscaping jobs. There are no jobs in process at the
beginning of May. Listed below are data concerning the three landscaping jobs conducted
during May.

Southside Oceanview Rocky Heights

Direct materials $5,450 $7,635 $6,480
Landscaper labor costs $4,810 $5,980 $5,525
Landscaper hours 74 92 85

Overhead costs are applied to jobs based on landscaper hours, and the predetermined
overhead rate is $60 per landscaper hour. The Southside job is the only incomplete job at the
end of May. Actual overhead for the month was $15,400.

(a) Determine the cost of each job.

(b) Indicate the balance of the Landscape Contracts in Process account at the end of May.
(c) Calculate the ending balance of the Operating Overhead account for May.
(d) During May, Larry is approached by the owner of Mountain Estates who would like to
contract with Larry’s company. Larry is working to prepare the bid for Mountain Estates
and has the following information: Direct materials, $10,450 and Landscaper hours, 125
hours. Analyze the financial information provided for Southside, Oceanview and Rocky
Heights and help Larry complete his bid by estimating the total cost of the Mountain
Estates job.

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a) Cost of each job

2
 Southside Oceanview Rocky Heights
Direct Material $5,450.00 $7,635.00 $6,480.00
Landscape labor costs $4,810.00 $5,980.00 $5,525.00

Applied Overhead (Landscape hours x $60

$4,440.00 $5,520.00 $5,100.00
per hour)

Total Cost $ 14,700.00 $ 19,135.00 $ 17,105.00

b) Balance of the Landscape Contracts in Process account at the end of May

Balance in service contracts in process
$ 14,700.00
account
* Southside is the only job not completed

c) ending balance of the Operating Overhead account for May

Actual overhead $ 15,400.00

Applied overhead ($4,440.00 + $5,520.00

$ (15,060.00)
$5,100.00)

Balance in operating overhead account

$ 340.00
(overapplied)

d) estimate the total cost of the Mountain Estates job

Direct material $ 10,450.00

Landscape Labor costs ($65 x 125 hr) $ 8,125.00

Operating Overhead (125hrs x $60) $ 7,500.00

Total Estimated costs $ 26,075.00

*
Labor hours for Southside:
74
Labor hours for Oceanview:
92
Labor hours for Rocky Heights: 85

Chapter 3: Process Costing

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4. The Sanding Department of Kayden Company has the following production and cost data for
November.

Production Costs
1. Started and completed 9,000 units. Beginning work in process $ -0-
2. Started 3,000 units that are 75% Materials 56,250
completed at November 30. Labor 123,750
Manufacturing Overhead 45,000

Materials are entered at the beginning of the process. Conversion costs are incurred uniformly
during the process. Kayden Company uses the FIFO method to compute equivalent units.

(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.
(b) Compute unit costs and show the assignment of manufacturing costs to units transferred
out and in work in process.
(c) Repeat parts (a) and (b) above, if beginning work in process consists of 1,000 units
valued at $10,325 ($4,800 are materials). The units are 40% complete as to conversion
costs. Materials costs are unchanged, labor costs are $125,669 and manufacturing
overhead costs are $49,000.

Note: Round all calculations to the nearest penny.

A) Equivalent units of production Materials and Conversion Costs

Beginning work in process Units transferred out Ending work in process
0 9,000 3,000

9,000+ 3,000= 12,000 equivalent units of production

B) Unit Cost and assignment of manufacturing costs to unit transferred out and in work in
progress
Production
Started and completed 9,000 units
Started and completed 75% (November 30) 2,250 units
11250 units

C)
Production
Started and completed 9,000 units

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Started and completed 40% (November 30) 400 units

Cost
Beginning work in process $10,325
Material $4,800
Labor $125,669
Manufacturing Overhead $49,000

Chapter 4: Activity-Based Costing

5. Smithson, Inc. produces two types of gas grills: a family model and a deluxe model.
Smithson’s controller has decided to use a plantwide overhead rate based on direct labor costs.
The president of the company recently heard of activity-based costing and wants to see how the
results would differ if this system were used. Two activity cost pools were developed:
machining and machine setup. Presented below is information related to the company’s
operations:

Family Model Deluxe Model

Direct labor costs $75,000 $150,000
Machine hours 2,000 2,000
Setup hours 200 800

Total estimated overhead costs are $450,000. Overhead cost allocated to the machining activity
cost pool is $270,000 and $180,000 is allocated to the machine setup activity cost pool.

(a) Compute the overhead rate using the traditional (plantwide) approach.
(b) Compute the overhead rates using the activity-based costing approach.
(c) Determine the difference in allocation between the two approaches.
(d) Smithson, Inc. decided to implement the activity-based costing approach and was quite
successful in its use. However, the controller is wondering if instead of only two activity
cost pools, they should expand to three activity cost pools based on the following:

Family Model Deluxe Model

Direct labor costs $75,000 $150,000
Machine hours 2,000 2,000
Setup hours 200 800
Packaging hours 50 75

The estimated overhead of $450,000 is allocated as follows: machining activity cost

pool $240,000, machine set up $170,000 and packaging $40,000.

(1) Determine the overhead rates using the activity-based costing approach with
three cost pools.
(2) Determine the overhead allocation for the family model and the deluxe model
using three activity cost pools. What is the difference in allocation between two
activity cost pools and three activity cost pools? Is the difference in allocation
worth using the third activity cost pool?

A) Calculation of Overhead rate under traditional method:

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 * Total Overhead Costs $450,000

Particulars Family Model Delex Model Total

Direct Labor cost (Basis $75,000 $150,000 $225,000
of allocation of
overheads)
Overheads cost per direct $2.00 (450,000/225,000) $2.00 (450,000/225,000)
labor hours
Calculation ($2.00*75,000) ($2.00*150,000)
Allocation of overheads $150,000 $300,000 $450,000

B) Calculation of Overhead rate under ABC costing method

*Machine activity overheads (A)= $270,000

Particulars Family Model Delex Model Total

Machine Hours 2000 2000 4000
Cost per activity $67.50 $67.50
(270,000/4000) (270,000/4000)
Allocations of overheads (A) $135,000 $135,000 $270,000

* Setup Activity overheads (B)= $180,000

Particulars Family Model Delex Model Total

Setup hours 200 800 1000
Cost per activity $180 $180
(1800,000/1000) (1800,000/1000)
Allocation of overheads $36,000 $144,000 $180,000
setup (B)

Family Model Delex Model Total

Total Overhead $171,000 $279,000 $450,000
Allocation under ABC
costing (A+B)

C) Cost Allocation based on traditional approach

Family Model Delex Model Total
Cost Allocation ($21,000) $21,000 $0
(150,000-171,000) (300,000-279,000)
D)
1- Overhead rates using ABC approaching
Pools Total Cost Number of Cost per activity Difference
activity
Machine $240,000 4000 $60.00 $7.50 (67.50-
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Activity 60.00)
Machine Setup $170,000 1000 $170.00 $10.00 (180.00-
Activity 170.00)
Packaging $40,000 125 $320.00
$450,000

2- Cost allocation based on ABC approaching

Family Model Delex Model
Direct Labor Cost $75,000.00 $150,000.00
Add: Machining activity cost $120,000.00 $120,000.00
($60*2000) ($60*2000)
Add: Machining setup activity $34,000.00 $136,000.00
cost ($170*200) ($170*800)
Add: Packaging Cost $16,000.00 $24,000.00
($320*50) ($320*75)
Total Cost $245,000.00 $430,000.00

Total cost allocated to FAMILY MODEL is higher by $20,000 ($245,000-$225,000) under

traditional approach and cost of DELUXE MODEL is higher by $20,000 ($450,000-
430,000) under traditional costing approach. There is a difference of $1,000 in allocation
of total cost using third activity.

Chapter 5: Cost-Volume-Profit

7. Joyful Journeys Music School provides private music lessons for elementary students. Its
operating costs are as follows:

Rent on facilities $2,200 per month

Advertising $274 per month
Instrument Rent $750 per month
Teaching Instruction $40 per student
Books $5 per student
Other Costs $3 per student

Joyful Journeys charges $100 per student per month.

(a) Determine the company’s break-even point in (1) number of students taught per month
and (2) dollars.

(b) Joyful Journeys has just received notice that the rent on their facilities will be increasing
by $500 per month and the instrument rent will also be increasing $20 per month.

(1) Determine the company’s break-even point in the number of students taught per
month based on the new information.
(2) Determine the amount to charge per student if Joyful Journeys does not increase the
number of students taught.

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A)
1) Contribution per student taught per month = 100 - (40 + 5 + 3)
= 100 – 48 = $ 52.
Break even point (in terms of the number of students taught per month) = Fixed costs /
Contribution per student taught per month.
= (2200 + 274 + 750) / 52 = 3224 / 52 = 62 students.
2). Break even point (in dollar terms) = Break even point (in terms of the number of
students taught per month) * Service revenue to be charged from every student per
month.
= 62 * 100 = $ 6200.

B)
(1) Break even point (in terms of number of students 72
taught per month) Students

(2) Break even point (in the dollar terms) $ 120

Chapter 6: Cost-Volume-Profit Analysis

9. Booth Company had sales in 2017 of $1,875,000 on 75,000 units. Variable costs totaled
$1,125,000 and fixed costs totaled $500,000.

A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00).
However, to process the new raw material, fixed operating costs will increase by $125,000.
Management feels that two-thirds of the decline in the variable costs per unit should be passed
on to customers in the form of a sales price reduction. The marketing department expects that
this sales price reduction will result in a 4% increase in the number of units sold.

(a) Prepare a projected CVP income statement for 2017 (1) assuming the changes have not
been made, and (2) assuming that changes are made as described.

(b) Before Booth Company had the chance to implement usage of the new raw material,
new industry specifications were announced and result in the following changes for the
Booth Company. Variable costs will increase by 15% per unit and fixed costs will
increase by $50,000. Management feels that a $3 per unit price increase is needed to
accommodate the cost increases. However, this will result in a 10% decrease in units
sold. Prepare a CVP income statement assuming these changes have been made.

(c) The marketing department suggests implementing an advertising promotion that would
increase variable costs by $.50 per unit but would retain the original sales volume of
75,000 units. Prepare a CPV income statement with these changes. Do you
recommend implementation of the advertising program? Why or why not?

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(a)
(1) Booth Company
CVP Income Statement
For the year ended December 31, 2014

Sales (75,000 units x $25/unit)……………………………………………………$1,875,000

Variable Costs (75,000 units x $15/unit……………………………………….. 1,125,000
Contribution margin…………………………………………………………………….. 750,000
Less: Fixed costs…………………………………………………………………………. 500,000
Net income………………………………………………………………………………….$ 250,000

(2) Booth Company

CVP Income Statement
For the year ended December 31, 2014

Sales (78,000 units x $23/unit)……………………………………………………$1,794,000

Variable Costs (78,000 units x $12/unit……………………………………….. 936,000
Contribution margin…………………………………………………………………….. 858,000
Less: Fixed costs…………………………………………………………………………. 625,000
Net income………………………………………………………………………………….$ 233,000

(b) Booth Company

CVP Income Statement
For the year ended December 31, 2014

Sales (67,500 units x $28/unit)……………………………………………………$1,890,000

Variable Costs (67,500 units x $17.25/unit…………………………………….1,164,375
Contribution margin…………………………………………………………………….. 725,625
Less: Fixed costs…………………………………………………………………………. 550,000
Net income………………………………………………………………………………….$ 175,625

(c) Booth Company

CVP Income Statement
For the year ended December 31, 2014

Sales (75,000 units x $28/unit)……………………………………………………$2,100,000

Variable Costs (75,000 units x $17.75/unit………….………………………..1,331,250
Contribution margin…………………………………………………………………….. 768,750
Less: Fixed costs…………………………………………………………………………. 550,000
Net income………………………………………………………………………………….$ 218,750
Operating leverage = Contribution margin / Net income

Personal Service System Automated Self-Service System

Contribution Margin 625,000 1,375,000
Net income 500,000 = 1.25 500,000 = 2.75

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Increase in sales = $250,000/$2,500,000 = 10% increase

Personal Service System = 1.25 x 10% = 12.5% increase in net income with 10% increase in sales

Automated Self-Service System = 2.75 x 10% = 27.5% increase in net income with 10% increase
in sales

The automated self-service system would produce the higher net income with a 10% increase in
sales.

Margin of safety ratio = (Actual sales – Break-even sales) / Actual sales

Personal Service System:

Break even = Fixed Costs / Contribution margin ratio = $125,000 / ($625,000 / $2,500,000)
= $125,000 / .25
= $500,000

Margin of Safety Ratio = ($2,500,000 - $500,000)/ $2,500,000 = .80

Automated Self-Service System:

Break even = Fixed Costs / Contribution margin ratio = $875,000 / ($1,375,000 / $2,500,000)
= $875,000 / .55
= $1,590,909

Margin of Safety Ratio = ($2,500,000 - $1,590,909)/ $2,500,000 = .36

The personal service system could sustain an 80% decrease in sales before sustaining a loss.
The automated self-servicer system could sustain a 36% decrease in sales before sustaining a
loss.

(1) Blended System

Contribution Margin 1,000,000
Net income 500,000 = 2.00 operating leverage

(2) $250,000 / $2,500,000 = 10% increase in sales

Blended System = 10% x 2 = 20% increase in net income with a 10% increase in sales.

(3)
Break even = Fixed Costs / Contribution margin ratio = $500,000 / ($1,000,000 / $2,500,000)
= $500,000 / .40
= $1,250,000

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 Margin of Safety Ratio = ($2,500,000 - $1,250,000)/ $2,500,000 = .50

The blended system could sustain a 50% decrease in sales before sustaining a loss.

(4) The blended system moderates the risk and provides a good return without taking on
too much risk or being too conservative.

Chapter 7: Incremental Analysis

11. Conklin Company manufactures outdoor fireplaces. For the first 9 months of 2017, the
company reported the following operating results while operating at 80% of plant capacity:

Sales (75,000 units) $6,750,000

Cost of goods sold 4,875,000
Gross profit 1,875,000
Operating expenses 750,000
Net income $1,125,000

Cost of goods sold was 80% variable and 20% fixed; operating expenses were 70% variable
and 30% fixed.

In October, Conklin Company receives a special order for 4,000 fireplaces at $62 each from
Langston’s Landscape Company. Acceptance of the order would result in an additional $7,000
of shipping costs but no increase in fixed operating expenses.

(a) Prepare an incremental analysis for the special order.

(b) Should Conklin Company accept the special order? Why or why not?
(c) Before Conklin could give Langston’s Landscape Company an answer, they received a
special order from Benson Building & Supply for 15,000 fireplaces. Benson is willing to
pay $65 per fireplace but they want a special design imbedded into the fireplace that
increases cost of goods sold by $67,500. The special design also requires the purchase
of a part that costs $5,000 and will have no future use for Conklin Company. Benson
Building & Supply will pick up the fireplaces, so no shipping costs are involved. Due to
capacity limitations, Conklin cannot accept both special orders. Which order should be
accepted? Document your decision by preparing an incremental analysis for Benson’s
order.

A) Incremental analysis

Sales (75,000 unit) 6,750,000

Selling price/unit 90
Cost of goods sold 4,875,000

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 Cost of goods sold/unit 65
Cost of goods sold/ unit (fixed) 13
Cost of goods sold/ unit (variable) 52
Total cost of goods sold (fixed) 975,000
Gross Profit 1,875,000
Operating expenses 750,000
Fixed Operating expenses 225,000
Operating expenses/unit 10
Variable operating expenses/ unit 7
Net Income 1,125,000
Net Income/ Unit 15

Especial Order
Revenue 248,000 (4,000*62)
Cost 243,000 (4,000*59)+7,000
Net Income 5,000

B) The analysis indicates net income increases by $5,000; therefore, Conklin Company should
accept the special order.

C) Benson’s incremental analysis

Revenue $975,000 (15,000*65)
Cost of goods sold $ 885,000 (15,000*59)
Cost of goods sold especial $ 72,5000 (67,500+5,000)
order
Net Income $17,500

The analysis indicates that Conklin Company should accept Benson’s order the net
income is higher and he will have a new part as well to be used in other orders later.

Chapter 9: Budgetary Planning

13. Urbina Inc. is preparing its annual budgets for the year ending December 31, 2017.
Accounting assistants furnish the following data.

Product LN 35 Product LN 40
Sales budget:
Anticipated volume in units 400,000 240,000
Unit selling price $25 $35
Production budget:
Desired ending finished goods units 20,000 25,000
Beginning finished goods units 30,000 15,000
Direct materials budget:
Direct materials per unit (pounds) 2 3
Desired ending direct materials pounds 50,000 10,000
Beginning direct materials pounds 40,000 20,000

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 Cost per pound $2 $3
Direct labor budget:
Direct labor time per unit 0.5 0.75
Direct labor rate per hour $12 $12
Budgeted income statement:
Total unit cost $12 $22

An accounting assistant has prepared the detailed manufacturing overhead budget and the
selling and administrative expense budget. The latter shows selling expenses of $750,000 for
product LN 35 and $580,000 for product LN 40, and administrative expenses of $420,000 for
product LN 35 and $380,000 for product LN 40. Interest expense is $110,000 (not allocated to
products). Income taxes are expected to be 30%.

Prepare the following budgets for the year. Show data for each product. You do not need to
prepare quarterly budgets.
(a) Sales (d) Direct labor
(b) Production (e) Multiple-step Income statement (Note: Income
(c) Direct materials taxes are not allocated to the products.)

A) Sales
Particulars Product LN 35 Product LN 40 Total
Anticipated Sales in 400,000 240,000 640,000
Units (A)
Selling Price per unit $25 $35 -
(B)
Total Sales (AxB) $10,000.000 $8,400.000 $18,400.000

B) Production
Particulars Product LN 35 Product LN 40 Total
Anticipated sales in 400,000 240,000 -
unit
Add: Desired ending 20,000 25,000 -
finishing goods
Less: Beginning 30,000 15,000 -
finished goods
Required Production 390,000 250,00 640,000
in units

C) Direct materials
Particulars Product LN 35 Product LN 40 Total
Unit to be produced 390,000 250,000 -
(A)
Direct material per 2 3 -
unit
Pounds required 780,000 750,000 1,530,000
for production
(AXB)

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 Add: Desired 50,000 10,000 -
ending direct
materials
Less: Beginning 40,000 20,000 -
direct material
Direct materials 790,000 740,000 1,530,000
purchases (C)
Cost per pound (D) $2 $3
Total cost of direct 1,580,000 2,220,000 3,800,000
material
purchases (CXD)

D) Direct Labor
Particulars Product LN 35 Product LN 40 Total
Units to be produced 390,000 250,000 -
(A)
Direct labor time per 0.5 0.75 -
unit (B)
Total direct labor 195,000 187,500 382,500
hours (AxB)
Direct labor rate per $12 $12 -
hour
Total Direct labor 2,340,000 2,250,000 4,590,000
cost

Chapter 10: Budgetary Control

14. As sales manager, Hank Short was given the following static budget report for selling
expenses in the Winter Sports Department of Jennings Outdoor Company for the month of
November.

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 Jennings Outdoor Company
Winter Sports Department
Budget Report
For the Month Ended November 30, 2017
Difference
Favorable F
Budget Actual Unfavorable U
Sales in units 4,000 4,500 500 F
Variable expenses
Sales commissions $120,000 $128,000 $ 8,000 U
Advertising expense 38,000 41,250 3,250 U
Travel expense 185,000 202,125 17,125 U
Demonstration models given out 100,000 90,750 9,250 F
Total variable 443,000 462,125 19,125 U
Fixed expenses
Rent 7,500 7,500 -0-
Sales salaries 60,000 60,000 -0-
Office salaries 40,000 40,000 -0-
Depreciation – vans (sales staff) 2,500 3,000* 500 U
Total fixed 110,000 110,500 500 U
Total expenses $553,000 $572,625 $ 19,625 U

*The increase in depreciation was due to a new vehicle that had to be purchased as a result of
an accident driving on snowy roads on the way to visit a customer.

Because of this budget report, Hank was called into the president’s office and congratulated on
his fine sales performance. He was reprimanded, however, for allowing his costs to get out of
control. Hank knew something was wrong with the performance report that he had been given.
However, he was not sure what to do, and comes to you for advice.

(a) Prepare a budget report based on flexible budget data to help Hank.
(b) Should Hank have been reprimanded? Explain.
(c) After Hank became familiar with the flexible budget report, he began to analyze the
numbers. Hank feels that sales can be increased if Jennings Outdoor Company would
increase sales commissions to $31 per unit. This would allow them to reduce
advertising expense to $8.00 per unit. Hank thinks that these changes will motivate the
sales staff to sell at least 5,500 units. He can try his plan in December and had the
following results.

Jennings Outdoor Company

Winter Sports Department
Results
For the Month Ended December 31, 2017

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 Sales in units 5,500
Variable expenses
Sales commissions $164,000
Advertising expense 42,000
Travel expense 247,000
Demonstration models given out 116,000
Total variable 569,000
Fixed expenses
Rent 7,500
Sales salaries 60,000
Office salaries 40,000
Depreciation – vans (sales staff) 3,000
Total fixed 110,500
Total expenses $679,500

Prepare a budget report based on flexible budget data. The new depreciation amount has been
included in the budgeted fixed costs. Do you think the new plan is valid? Explain.

A) Budget report based on flexible budget data

Flexible Budget (w.r.t 4600 units)

Actual Budget Remarks

Units sold 4600 4600

Variable Expenses

Sale commission 128000 138000 F

Advertising expense 41250 43700 F

Travel expense 202125 212750 F

Demo models given out 90750 115000 F

462125 509450

Fixed Expense

Rent 7500 7500

Sales salaries 60000 60000

Office salaries 40000 40000

Depreciation 3000 2500 U

110500 110000

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 Total Expenses 572625 619450 F

B) Yes, Hank should be reprimanded as the budget he draws is based on the sale of 4000
units. As the sale units goes higher, variable cost per unit for sale should also go along
with the sale nos.As seen above in flexible budget, all the cost center shows the
favorable variance.
C)

Flexible Budget report (w.r.t 6500 units)

Actual Budget Remarks

Units sold 6500 6500

Variable Expenses

Sale commission 164000 201500 F

Advertising expense 42000 52000 F

Travel expense 247000 300625 F

Demo models given out 116000 162500 F

569000 716625

Fixed Expense

Rent 7500 7500

Sales salaries 60000 60000

Office salaries 40000 40000

Depreciation 3000 3000

110500 110500

Total Expenses 679500 827125 F

Chapter 11: Standard Costs

15. Anders Painting Service specializes in painting tall office buildings. During a recent month,
the company worked on three painting projects (the Arrow Building, the Besler Building, and the

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Cartwright Building). The company is interested in controlling the materials costs, namely the
paint, used for these painting contracts.

To provide management with useful cost control information, the company uses standard costs
and prepares monthly variance reports. Analysis reveals that the purchasing agent mistakenly
purchased poor-quality paint for the Arrow Building project. The Besler Building project,
however, received higher-than-standard-quality paint that was on sale. The Cartwright Building
project received standard-quality paint. However, the price had increased, and a new employee
was used to paint the building.

Shown below are quantity and cost data for each project.

Actual ___ Standard Total

Project Quantity Costs Quantity Costs Variance
Arrow Building 3,750 gallons $285,000 3,500 gallons $280,000 $ 5,000 U
Besler Building 3,800 $296,400 4,000 $320,000 23,600 F
Cartwright Building 4,500 $369,000 4,200 $336,000 33,000 U
Total variance $14,400 U

(a) Prepare a variance report for the purchasing department with the following columns: (1)
Project, (2) Actual Gallons Purchased, (3) Actual Price, (4) Standard Price, (5) Price
Variance, and (6) Explanation.
(b) Prepare a variance report for the production department with the following columns: (1)
Project, (2) Actual Gallons, (3) Standard Gallons, (4) Standard Price, (5) Quantity
Variance, and (6) Explanation.
(c) In an effort to improve performance, Anders Painting Service found a new supplier that
sold average quality paint. The initial quantity and cost data for each project is below:

Actual Standard Total

Project Quantity Costs Quantity Costs Variance
Arrow Building 3,650 gallons $286,525 3,500 gallons $280,000 $ 6,525 U
Besler Building 3,800 $298,300 4,000 $320,000 21,700 F
Cartwright Building 4,350 $341,475 4,200 $336,000 5,475 U
Total variance $ 9,700 F

(1) Prepare a variance report for the purchasing department with the following columns:
(a) Project, (b) Actual Gallons Purchased, (c) Actual Price, (d) Standard Price, (e) Price
Variance, and (f) Explanation.

(2) Prepare a variance report for the production department with the following columns:
(a) Project, (b) Actual Gallons, (c) Standard Gallons, (d) Standard Price, (e) Quantity
Variance, and (f) Explanation.

(3) Discuss whether the change to the new supplier is beneficial to Anders Painting
Service and why or why not.

Actual Gallon Actual Standard Price

Project Purchased price Price variance Explanation

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Arrow Building 3750 76 80 -15000 F

Besler Building 3800 78 80 -7600 F

Cartwright Building 4500 82 80 9000 U

Total -13600 F

Arrow Building 285000/3750 76 280000/3500 80

Besler Building 296400/3800 78 320000/4000 80

Cartwright Building 369000/4500 82 336000/4200 80

Actual Gallon Standard Standard Price

Project Purchased Gallon Price variance Explanation

Arrow Building 3750 3500 80 20000 U

Besler Building 3800 4000 80 -16000 F

Cartwright Building 4500 4200 80 24000 U

Total 28000 U

Actual Gallon Actual Standard Price

Project Purchased price Price variance Explanation

Arrow Building 3650 78.5 80 -5475 F

Besler Building 3800 78.5 80 -5700 F

Cartwright Building 4350 78.5 80 -6525 F

Total -17700 F

Arrow Building 286525/3650 78.5 280000/3500 80

Besler Building 298300/3800 78.5 320000/4000 80

Cartwright Building 341475/4350 78.5 336000/4200 80

Actual Gallon Standard Standard Price

Project Purchased Gallon Price variance Explanation

Arrow Building 3650 3500 80 12000 U

Besler Building 3800 4000 80 -16000 F

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 Cartwright Building 4350 4200 80 12000 U

Total 8000 U

Yes, it is more favorable to change to the new supplier because there is Favorable price
variance $17700 as against previous one which was $13600 favorable.
As quantity variance is also less unfavorable it is $8000 against the previous with more
unfavorable variance of $28000

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