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Standard Costing and Variance Analysis: Seventh Edition
Standard Costing and Variance Analysis: Seventh Edition
Seventh Edition
Chapter 10
Standard Costing
and Variance
Analysis
Required:
Plot the actual costs over time against the upper and
lower control limits. Determine when a variance should
be investigated.
Required:
Calculate the total variance for corn for the first week in
March.
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Example 10.3: How to Calculate the
Total Variance for Materials (2 of 2)
Solution:
Actual Costs Budgeted Costs* Total Variance
AP × AQ SP × SQ (AP × AQ) − (SP × SQ)
Corn $11,700 $8,730 $2,970 U
Required:
Calculate the materials price and usage variances by
using the 3-pronged (columnar) and formula
approaches.
© 2019 Cengage. All rights reserved.
Example 10.4: How to Calculate Materials Variances:
Formula and Columnar Approaches (2 of 3)
Solution:
1. Formulas (recommended approach for materials
variances because materials purchased may differ
from materials used):
MPV = (AP – SP) × AQ
= ($0.015 – $0.01) × 780,000
= $3,900 U
MUV = (AQ – SQ) × SP
= (780,000 – 873,000) × $0.01
= $930 F
Required:
Calculate the total labor variance for inspection labor
for the first week in March.
Required:
Calculate the labor rate and efficiency variances by using
the 3-pronged (columnar) and formula approaches.
Standard variable overhead rate (SVOR) $4.00 per direct labor hour
Actual variable overhead costs (AH) $38,750
Standard hours allowed per unit 0.02 hour
Actual direct labor hours worked (AH) 10,500 hours
Actual production (packages) 500,000 units
Required:
Calculate (1) the standard direct labor hours for actual
production and (2) the total variable overhead variance.
© 2019 Cengage. All rights reserved.
Example 10.7: How to Calculate the Total
Variable Overhead Variance (2 of 2)
Solution:
1. Standard direct labor hours = 0.02 × 500,000 units
= 10,000 direct labor hours
Required:
Calculate the variable overhead spending and
efficiency variances.
© 2019 Cengage. All rights reserved.
Example 10.8: How to Calculate Variable Overhead
Spending and Efficiency Variances: Columnar and
Formula Approaches (2 of 3)
Standard fixed overhead rate (SFOR) $15.00 per direct labor hour
Actual FOH $160,000
Standard hours allowed per unit 0.02 hour
Actual production 500,000 units
Required:
Calculate the (1) standard hours for actual units
produced, (2) total applied FOH, and (3) total FOH
variance.
Formulas:
a
FOH Spending Variance = Actual FOH – BFOH
= $160,000 – $157,500
= $2,500 U
b
FOH Volume Variance = BFOH – Applied FOH
= BFOH – (SH × SFOR)
= $157,500 – (10,000 × $15)
= $157,500 – $150,000
= $7,500 U
Materials SP × AQ
Materials Price Variance (AP − SP) × AQ
Accounts Payable AP × AQ
Work in Process SP × SQ
Materials Usage Variance (AQ − SQ) × SP
Materials SP × AQ
Work in Process SR × SH
Labor Efficiency Variance (AH ─ SH) × SR
Labor Rate Variance (AR ─ SR) × AH
Accrued Payroll AR × AH