Exercise2–14

1. Beginninginventory+Purchases–Endinginventory=Directmaterialsused

$9,000+$143,000–Endinginventory=$110,000

Endinginventory=$42,000

2. Unitsinbeginningfinishedgoodsinventory=$3,422/$11.80=290

Since8,000unitsweremanufacturedand290wereinbeginningfinishedgoodsinventory,8,290unitswereavailableforsale.But8,120unitsweresold,soendingfinishedgoodsinventoryis170.

3. Costofgoodsmanufactured=$40,000+$20,000–$18,750=$41,250

4. Primecost=$70=Directmaterials+Directlabor

Directmaterials=$70–Directlabor

Conversioncost=$84=Directlabor+Overhead

Overhead=$84–Directlabor

($70–Directlabor)+Directlabor+($84–Directlabor)=$120

Directlabor=$34

Directmaterials+Directlabor=$70

Directmaterials+$34=$70

Directmaterials=$36

5. Totalmanufacturingcosts+BWIP–EWIP=COGM

$446,900+$160,000–EWIP=$512,000

EWIP=$94,900

Primecost+Overhead=Totalmanufacturingcosts

$290,000+Overhead=$446,900

Overhead=$156,900

Exercise2–17

1. LuceroCompany

StatementofCostofGoodsManufactured

FortheYearEndedDecember31

Directmaterials:

Beginninginventory $ 47,000

Add:Purchases 160,400

Freight-inonmaterials 830

Materialsavailable $208,230

Less:Endinginventory 17,000

Directmaterialsusedinproduction $191,230

Directlabor 206,780

Manufacturingoverhead:

Materialshandling $ 26,750

Factorysupplies 37,800

Factoryutilities 46,000

Factorysupervisionandindirectlabor 190,000

Totaloverheadcosts 300,550

Totalmanufacturingcostsadded $698,560

Add:Beginningworkinprocess 201,000

Less:Endingworkinprocess (98,000)

Costofgoodsmanufactured $801,560

2. LuceroCompany

StatementofCostofGoodsSold

FortheYearEndedDecember31

Costofgoodsmanufactured $801,560

Add:Beginningfinishedgoodsinventory 18,000

Costofgoodsavailableforsale $819,560

Less:Endingfinishedgoodsinventory 62,700

Costofgoodssold $756,860

Exercise2–18

1. Beginninginventory,materials $ 1,050

+ Purchases 11,450

– Endinginventory,materials (950)

Materialsusedinserviceprovision $ 11,550

2. Primecost=$11,550+$5,570=$17,120

3. Conversioncost=$5,570+$8,130=$13,700

4. Directmaterials $ 11,550

Directlabor 5,570

Overhead 8,130

Costofservices $ 25,250

5. Send‘n’Deliver

IncomeStatement

FortheMonthEndedMay31

Salesrevenues $ 36,100

Costofservicessold 25,250

Grossmargin $ 10,850

Operatingexpenses:

Advertising (750)

Franchisefee(0.05×$36,100) (1,805)

Otheradministrativeexpenses (3,650)

Operatingincome $ 4,645

6. Clearly,therent,insurance,andutilitiesareindirectcosts.NomatterhowmanypackagesJanineandherworkerspackageandsendofffordelivery,therent,utilities,andinsurancewillbethesame.TheamountpaidtoUPSandFedEx,however,forthepackagedeliveryisadirectcost.Thisamount,whichiscollectedbySend‘n’Deliver,isadirectcostofeachpackage.Itwillchangefrommonthtomonthaccordingtothenumberandtypeofpackagesthatcustomersdropoff.

Problem2–23

1. Directmaterials=$124,000+$250,000–$102,000=$272,000

2. Primecost=$272,000+$140,000=$412,000

3. First,calculatetotaloverheadcost:

Depreciationonfactoryequipment $ 45,000

Depreciationonfactorybuilding 30,000

Factoryinsurance 15,000

Factorypropertytaxes 20,000

Factoryutilities 34,000

Indirectlaborsalaries 156,000

Totaloverhead $300,000

Conversioncost=$140,000+$300,000=$440,000

4. BrodyCompany

StatementofCostofGoodsManufactured

ForLastYear

Directmaterials $ 272,000

Directlabor 140,000

Overhead 300,000

Totalmanufacturingcost $ 712,000

Add:Beginningworkinprocess 124,000

Less:Endingworkinprocess (130,000)

Costofgoodsmanufactured $ 706,000

Unitproductcost=$706,000/100,000units=$7.06

5. BrodyCompany

StatementofCostofGoodsSold

ForLastYear

Costofgoodsmanufactured $706,000

Add:Beginninginventory,Finishedgoods 84,000

Less:Endinginventory,Finishedgoods 82,000

Costofgoodssold $708,000

Problem2–23 (Concluded)

6. First,computesellingexpenseandadministrativeexpense:

Utilities,salesoffice $ 1,800

Salesofficesalaries 90,000

Salescommissions($1,200,000×0.05) 60,000

Sellingexpense $151,800

Depreciationonheadquartersbuilding $ 50,000

Propertytaxes,headquarters 18,000

Administrativesalaries 150,000

Administrativeexpense $218,000

BrodyCompany

IncomeStatement

ForLastYear

Percent

Sales $1,200,000 100.00

Costofgoodssold 708,000 59.00

Grossmargin $ 492,000 41.00

Less:Operatingexpenses

Sellingexpenses $151,800 12.65

Administrativeexpenses 218,000 369,800 18.17

Operatingincome $ 122,200 10.18

Exercise3–17

1. Scattergraph:

Yes,thereappearstobealinearrelationship.

2. Low: 2,600,$135,060

High: 4,100,$195,510

V =(Y2–Y1)/(X2–X1)

=($195,510–$135,060)/(4,100–2,600)

=$60,450/1,500

=$40.30pertest

F =$195,510–$40.30(4,100)

=$30,280

Y =$30,280+$40.30X

3. Y =$30,280+$40.30(3,500)

=$30,280+$141,050

=$171,330

Exercise4–17

1. Laborcostisassignedtotheactivitiesusingdirecttracingandaresourcedriver(percentageoftime):

Supervisingemployees $64,600 (directtracing)

Processingtransactions $84,000 (0.40×$210,000)

Issuingstatements $63,000 (0.30×$210,000)

Answeringquestions $63,000 (0.30×$210,000)

Computer,desk,andprinterresourcesaredividedevenlyamongthelabortypesandthenassignedtoactivitiesusingdirecttracingandaresourcedriver(percentageofcomputertime):

Supervisingemployees* $4,900 (directtracing)

Processingtransactions $24,010 (0.70×$34,300)

Issuingstatements $6,860 (0.20×$34,300)

Answeringquestions $3,430 (0.10×$34,300)

Note:One-eighthofthecostisassignedbyevendivisiontothesupervisor[($32,000+$7,200)/8=$4,900].Theresidual($39,200–$4,900=$34,300)isassignedtotheclericalgroupandthentracedtotheactivitiesinproportiontohoursofcomputerusage.

Telephonecostisassignedtotwoactivities:

Supervisingemployees** $500 (directtracing)

Answeringquestions $3,500 (directtracing)

ATMcostiscomputedusingtransactionsastheresourcedriver:

ProvidingATMservices $250,000 (0.20×$1,250,000)

Thus,addingthecostsassigned,weobtainthefollowingactivitycosts:

Supervisingemployees $70,000 ($64,600+$4,900+$500)

Processingtransactions $108,010 ($84,000+$24,010)

Issuingstatements $69,860 ($63,000+$6,860)

Answeringquestions $69,930 ($63,000+$3,430+$3,500)

ProvidingATMservices $250,000

*($32,000+$7,200)/8=$4,900×100%

**($4,000/8)=$500pertelephone×100%

Exercise4–17 (Concluded)

2. Thecostofsupervisionisassignedtothefollowingprimaryactivities(usingrelativelaborcontentofeachactivity):

Processingtransactions $108,010+(0.40×$70,000) = $136,010

Issuingstatements $69,860+(0.30×$70,000) = $90,860

Answeringquestions $69,930+(0.30×$70,000) = $90,930

Note:NosupervisioncostisassignedtoprovidingATMsbecausenosupervisingtimeisspentonthisactivity.

Exercise4–18

1. Unbundlingmeansthatgeneralledgercostsareassignedtoactivities.Knowingthecostofactivitiesisthefirststepinassigningcoststoproducts(orothercostobjects).Costsarefirsttracedtoactivitiesandthentoproducts.

2. Thegeneralledgersystemcollectscostsbyaccounts.Itreportswhatisspent.AnABCdatabasecollectscostsbyactivitiesandrevealshowresourcesarespent.

3. Activity Cost

CreatingBOMs $ 63,000a

Studyingcapabilities 61,500b

Improvingprocesses 220,500c

Trainingemployees 106,000d

Designingtools 179,000e

a(0.20×$300,000)+(0.10×$30,000)

b(0.20×$300,000)+(0.05×$30,000)

c(0.40×$100,000)+(0.60×$100,000)+$50,000+(0.20×$300,000)+(0.35×$30,000)

d(0.40×$100,000)+(0.20×$300,000)+(0.20×$30,000)

e(0.60×$100,000)+$50,000+(0.20×$300,000)+(0.30×$30,000)

Theresourcedriversarepercentofmachineusage,percentofeffort,andpercentofsupplyusage.

4. First,assignthecostoftheactivity,studyingcapabilities,totheotherfouractivities.Apossibledriverisengineeringtime(assigncostsinproportiontotheengineeringtimespentoneachofthefouractivities).Amoredetailedapproachwouldbetoidentifythestudytimethatisspecificallyrelatedtoeachofthefouractivitiesandusethatasthedriver.

Exercise5–12

1. UsingJob114(anyofthethreejobscouldbeused,theoverheadratewillbethesame):

Predeterminedoverheadrate =$1,350/$1,800

=0.75,or75%ofdirectlaborcost

2. Job114 Job115 Job116

Balance,April1 $ 6,800 $ 4,630 $11,175

Directmaterials 16,500 12,200 5,000

Directlabor 4,200 4,200 3,000

Appliedoverhead 3,150 3,150 2,250

Total $30,650 $24,180 $21,425

3. EndingWorkinProcessconsistsofJobs114and116:

Job114 $30,650

Job116 21,425

EndingWorkinProcess $52,075

4. Costofgoodssold=Job115=$24,180

5. PriceofJob115=$24,180×1.2=$29,016

Exercise5–13

1. Journalentries:

a. Materials 26,000

AccountsPayable 26,000

b. WorkinProcess 33,700

Materials 33,700

c. WorkinProcess 11,400

WagesPayable 11,400

d. WorkinProcess 8,550*

OverheadControl 8,550

*$11,400×$0.75=$8,550

e. OverheadControl 8,718

VariousAccounts 8,718

f. FinishedGoods 24,180

WorkinProcess 24,180

g. CostofGoodsSold 24,180

FinishedGoods 24,180

AccountsReceivable 29,016**

SalesRevenue 29,016

**$24,180×120%=$29,016

2.

Materials

WorkinProcess

Bal. 12,450

(b) 33,700

Bal. 22,605

(f) 24,180

(a) 26,000

(b) 33,700

4,750

(c) 11,400

(d) 8,550

52,075

FinishedGoods

Bal. 4,600

(g) 24,180

(f) 24,180

4,600

Problem5–21

1. a. Materials 60,100

AccountsPayable 60,100

b. WorkinProcess 50,000

OverheadControl 8,800

Materials 58,800

c. WorkinProcess 75,000

OverheadControl 36,000

AdministrativeExpense 28,000

SellingExpense 19,000

WagesPayable 158,000

d. OverheadControl 10,400

AccumulatedDepreciation 10,400

e. OverheadControl 1,450

PropertyTaxesPayable 1,450

f. OverheadControl 6,200

PrepaidInsurance 6,200

g. OverheadControl 5,500

UtilitiesPayable 5,500

h. SellingExpense 7,900

Cash 7,900

i. AdministrativeExpense 800

SellingExpense 1,650

AccumulatedDepreciation 2,450

j. AdministrativeExpense 750

AccountsPayable 750

k. WorkinProcess($18×4,000) 72,000

OverheadControl 72,000

l. FinishedGoods 160,000

WorkinProcess 160,000

Problem5–21 (Concluded)

2.

Materials

WorkinProcess

Bal. 7,500

(b) 58,800

Bal. 37,000

(l) 160,000

(a) 60,100

(b) 50,000

8,800

(c) 75,000

(k) 72,000

74,000

FinishedGoods

OverheadControl

Bal. 50,000

(b) 8,800

(k) 72,000

(l) 160,000

(c) 36,000

210,000

(d) 10,400

(e) 1,450

(f) 6,200

(g) 5,500

3,650*

*Overappliedoverhead.

3. JericoCompany

StatementofCostofGoodsManufactured

FortheMonthEndedMay31,20XX

Directmaterials $ 50,000

Directlabor 75,000

Overhead:

Supplies $ 8,800

Indirectlabor 36,000

Depreciation,plant,andequipment 10,400

Propertytaxes 1,450

Utilities,factory 5,500

Insurance 6,200

$68,350

Plus:Overappliedoverhead 3,650

Overheadapplied 72,000

Manufacturingcostsadded $197,000

Add:Beginningworkinprocess 37,000

Less:Endingworkinprocess (74,000)

Costofgoodsmanufactured $160,000

4. Costofgoodssolddecreasesby$3,650.

Exercise6–17

1. Endingworkinprocess:

Directmaterials(6,000×$3.00) $ 18,000

Conversioncosts(4,500×$5.00) 22,500

Totalendingworkinprocess $ 40,500

Costofgoodstransferredout:

Unitsstartedandcompleted(22,000×$8.00) $176,000

Units,beginningworkinprocess:

Prior-periodcosts 55,000

Currentcoststofinish(6,000×$5.00) 30,000

Totalcostofgoodstransferredout $261,000

2. Physicalflowschedule:

Unitstoaccountfor:

Units,beginningworkinprocess 10,000

Unitsstarted 28,000

Totalunitstoaccountfor 38,000

Unitsaccountedfor:

Unitscompleted:

Startedandcompleted 22,000

Units,beginningworkinprocess 10,000

Units,endingworkinprocess 6,000

Totalunitsaccountedfor 38,000

Exercise6–18

A B C D

Unitscompleted 18,000a 22,000c 40,000d 50,000f

UnitsinendingWIP 800b 0 2,000e 1,000g

Equivalentunits 18,800 22,000 42,000 51,000

a(3,000+19,000–4,000) e(8,000×0.25)

b(4,000×0.20) f(25,000+35,000–10,000)

c(2,000+20,000–0) g(10,000×0.10)

d(48,000–8,000)

Exercise6–24

1. Journalentries:

a. WorkinProcess—Assembly 24,000

MaterialsInventory 24,000

b. WorkinProcess—Assembly 4,600

WorkinProcess—Finishing 3,200

WagesPayable 7,800

c. WorkinProcess—Assembly 5,000

WorkinProcess—Finishing 4,000

OverheadControl 9,000

d. WorkinProcess—Finishing 32,500

WorkinProcess—Assembly 32,500

e. FinishedGoods 20,500

WorkinProcess—Finishing 20,500

f. OverheadControl 10,000

MiscellaneousAccounts 10,000

g. (optionalentry)

CostofGoodsSold 1,000

OverheadControl 1,000

Exercise6–24 (Concluded)

2. WorkinProcess—Assembly:

$ 24,000

4,600

5,000

(32,500)

$ 1,100 endinginventory

WorkinProcess—Finishing:

$ 3,200

4,000

32,500

(20,500)

$ 19,200 endinginventory

Exercise7–23

1. Assembly Finishing

Squarefootage 0.5000 0.5000

Numberofreceivingorders 0.6222 0.3778

GeneralFactory:

(0.5000×$400,000) $200,000

(0.5000×$400,000) $200,000

Receiving:

(0.6222×$160,000) 99,552

(0.3778×$160,000) 60,448

Directcosts 43,000 74,000

$342,552 $334,448

2. Assembly: $342,552/25,000=$13.70perdirectlaborhour

Finishing: $334,448/40,000=$8.36perdirectlaborhour

Exercise7–24

1.

Receiving Assembly Finishing

Squarefootage 0.2000 0.4000 0.4000

Numberofreceivingorders 0.6222 0.3778

General

Factory Receiving Assembly Finishing

Directoverheadcost $ 400,000 $ 160,000 $ 43,000 $ 74,000

Allocate:

GeneralFactorya (400,000) 80,000 160,000 160,000

Receivingb 0 (240,000) 149,328 90,672

Total $ 0 $ 0 $352,328 $324,672

aReceiving=0.2×$400,000=$80,000;Assembly=0.4×$400,000=$160,000;Finishing=0.4×$400,000=$160,000

bAssembly=0.6222×$240,000=$149,328;Finishing=0.3778×$240,000=$90,672

2. Assembly: $352,328/25,000=$14.09perdirectlaborhour

Finishing: $324,672/40,000=$8.12perdirectlaborhour

Exercise7–27

1. Eventual Separable Hypothetical

Units Price MarketValue Costs MarketValue Percent

Overs 14,000 $2.00 $28,000 $18,000 $ 10,000 0.10

Unders 36,000 3.14 113,040 23,040 90,000 0.90

Total $100,000

Overs Unders

Jointcost $ 50,000 $50,000

×Percentofhypotheticalmarketvalue × 0.10 × 0.90

Allocatedjointcost $ 5,000 $ 45,000

2. Valueofoversatsplit-off(14,000×$1.80) $ 25,200

Valueofoverswhenprocessedfurther $ 28,000

Less:Furtherprocessingcost 18,000

Incrementalvalueoffurtherprocessing $10,000

Oversshouldnotbeprocessedfurtherastherewillbe$15,200moreprofitifsoldatsplit-off.

Exercise8–17

1. GPBCompany

DirectMaterialsPurchasesBudgetforFabric

FortheFourthQuarter

October November December Total

Unitsproduced 42,000 90,000 50,000 182,000

DMperunit(yd.) × 0.25 × 0.25 × 0.25 × 0.25

Productionneeds 10,500 22,500 12,500 45,500

Desiredendinginventory(yd.) 4,500 2,500 2,000 2,000

Totalneeded 15,000 25,000 14,500 47,500

Less:Beginninginventory 2,100 4,500 2,500 2,100

DMtobepurchased(yd.) 12,900 20,500 12,000 45,400

Costperyard × $3.50 ×$3.50 × $3.50 × $3.50

Totalpurchasecost $ 45,150 $71,750 $ 42,000 $ 158,900

2. GPBCompany

DirectMaterialsPurchasesBudgetforPolyfiberfill

FortheFourthQuarter

October November December Total

Unitsproduced 42,000 90,000 50,000 182,000

DMperunit(oz.) × 8 × 8 × 8 × 8

Productionneeds 336,000 720,000 400,000 1,456,000

Desiredendinginventory(oz.) 288,000 160,000 128,000 128,000

Totalneeded 624,000 880,000 528,000 1,584,000

Less:Beginninginventory 134,400 288,000 160,000 134,400

DMtobepurchased(oz.) 489,600 592,000 368,000 1,449,600

Costperounce × $0.05 × $0.05 × $0.05 × $0.05

Totalpurchasecost $ 24,480 $ 29,600 $ 18,400 $ 72,480

3. GPBCompany

DirectLaborBudget

FortheFourthQuarter20XX

October November December Total

Unitsproduced 42,000 90,000 50,000 182,000

Directlabortimeper

unit(hours) × 0.35 × 0.35 × 0.35 × 0.35

Directlaborhoursneeded 14,700 31,500 17,500 63,700

Costperdirectlaborhour × $14 × $14 × $14 × $14

Totaldirectlaborcost $205,800 $441,000 $245,000$891,800

Exercise8–26

1. ProductionbudgetforAugust:*

Unitsales 2,900

Desiredendinginventory 840

Totalneeded 3,740

Less:Beginninginventory 1,160

Unitsproduced 2,580

*Theproductionbudgetisbasedonthesalesbudgetandinventorypolicy,

notonactualinventoryfigures.

2. Augustpurchasesbudgetfortablelegs:

Unitsproduced 2,100

DMperunit(oz.) × 4

Productionneeds 8,400

Desiredendinginventory* 4,560

Totalneeded 12,960

Less:Beginninginventory 4,000

DMtobepurchased(oz.) 8,960

*Desiredendinginventory=(1,900×4)×0.60=4,560

3. Numberofdirectlaborhours =2,340units×(16/60)directlaborhourperunit

=624directlaborhours

Numberofemployees =Directlaborhours/Hoursperweek

=624/(40×4)=3.90

Problem8–34

1. Scheduleofpurchases:

Costofsales+0.3333Costofsales=Sales

Costofsales=0.75Sales

August September October November

Costofsales $ 90,000 $ 67,500 $ 75,000 $101,250

Desiredend.inventory* 27,000 30,000 40,500 45,000

Totalrequirements $117,000 $ 97,500 $115,500 $146,250

Less:Beg.inventory 36,000 27,000 30,000 40,500

Purchases $ 81,000 $ 70,500 $ 85,500 $105,750

*0.40×nextmonth’scostofsales

Sincepurchasesarepaidforinthefollowingmonth,accountspayableattheendofAugustis$81,000.InventoryforAugust31is$27,000.

AccountsreceivableforAugust31iscomputedasfollows:

FromAugust: 0.8×$120,000×0.8* = $ 76,800

FromJuly: 0.8×$100,000×0.3 = 24,000

Total $100,800

*ByAugust31,20percentofAugustcreditsaleshavebeencollected,leaving80percentstillonaccount.

Givenaccountspayable,thetotalassetsmustequal$569,750($81,000+$220,000+$268,750).Cashiscomputedasthedifferencebetweentotalassetsandallotherassetsexceptcash($569,750–$431,750–$27,000–$100,800).Thisdifferenceis$10,200.

Assets L&OE

Cash $ 10,200

Accountsreceivable 100,800

Inventory 27,000

Plantandequipment 431,750

Accountspayable $ 81,000

Commonstock 220,000

Retainedearnings 268,750

Totals $569,750 $569,750

2. CashBudget

ForthePeriodEndingNovember30

September October November Total

Beginningcashbalance $ 10,200 $ 10,900 $ 17,425 $ 10,200

Cashcollectionsa 104,400 100,800 110,200 315,400

Totalcashavailable $ 114,600 $ 111,700 $ 127,625 $ 325,600

Disbursements:

Accountspayableb $ 81,000 $ 70,500 $ 85,500 $ 237,000

Salariesandwages 10,000 10,000 10,000 30,000

Utilities 1,000 1,000 1,000 3,000

Other 1,700 1,700 1,700 5,100

Propertytaxes 15,000 — — 15,000

Advertisingfees — 6,000 — 6,000

Lease — — 5,000 5,000

Totaldisbursements $ 108,700 $ 89,200 $ 103,200 $ 301,100

Minimumcashbalance 10,000 10,000 10,000 10,000

Totalcashneeds $ 118,700 $ 99,200 $ 113,200 $ 311,100

Excess(deficiency) $ (4,100) $ 12,500 $ 14,425 $ 14,500

Financing:

Borrowings $ 5,000 $ 5,000

Repayments $ (5,000) (5,000)

Interestc (75) (75)

Totalfinancing $ 5,000 $ (5,075) $ (75)

Endingcashbalanced $ 10,900 $ 17,425 $ 24,425 $ 24,425

aCashcollections:

Cashsales $ 18,000 $ 20,000 $ 27,000 $ 65,000

Creditsales:

Currentmonth 14,400 16,000 21,600 52,000

Priormonth 48,000 36,000 40,000 124,000

From2monthsago 24,000 28,800 21,600 74,400

Totalcollections $ 104,400 $ 100,800 $ 110,200 $ 315,400

bForAccountsPayabletakenfromthebalancesheetdevelopedinRequirement1.

c$5,000×0.09×(2/12)(beginningofSeptembertoendofOctober).

dIncludesminimumcashbalanceof$10,000.

3. CreightonHardwareStore

ProFormaBalanceSheet

November30

Cash $ 24,425

Accountsreceivablea 110,400

Inventoryb 45,000

Plantandequipmentc 413,000

Accountspayableb $ 105,750

Commonstock 220,000

Retainedearningsd 267,075

Totals $ 592,825 $ 592,825

a(0.8×$135,000×0.8)+(0.8×$100,000×0.3).

bFrompurchasesschedulepreparedinRequirement1.

c$425,000–(3×4,000).

dIftotalassetsequal$592,825,thenliabilitiesplusstockholders’equitymustalsoequalthatamount.Subtractingaccountspayableandcommonstockfromtotalliabilitiesandstockholders’equitygivesretainedearningsof$267,075.

Exercise9–14

1. MPV=(AP–SP)AQ

MPV=($0.084–$0.10)640,000=$10,240F

MUV=(AQ–SQ*)SP

MUV=(640,000–639,600)$0.10=$40U

*SQ=78,000×8.2=639,600oz.

AP×AQ

=$0.084×640,000

=$53,760

SP×AQ

=$0.10×640,000

=$64,000

SP×SQ

=$0.10×639,600

=$63,960

MaterialsUsage

Variance

$40U

MaterialsPrice

Variance

$10,240F

2. LRV=(AR–SR)AH

LRV=($18–$18)5,510=$0

LEV=(AH–SH*)SR

LEV=(5,510–5,460)$18.00=$900U

*SH=78,000×0.07=5,460hr.

AR×AH

=$18×5,510

=$99,180

SR×AH

=$18×5,510

=$99,180

SR×SH

=$18×5,460

=$98,280

LaborEfficiency

Variance

$900U

LaborRate

Variance

$0

3. Materials 64,000

DirectMaterialsPriceVariance 10,240

AccountsPayable 53,760

WorkinProcess 63,960

DirectMaterialsUsageVariance 40

Materials 64,000

WorkinProcess 98,280

DirectLaborEfficiencyVariance 900

WagesPayable 99,180

Exercise9–15

1. Fixedoverheadanalysis:

AppliedFixed

Overhead

SFOR×SH

=$0.38×(4×163,400)

=$248,368

BudgetedFixed

Overhead

=$243,200

ActualFixed

Overhead

=$245,800

Spending

Variance

$2,600U

Volume

Variance

$5,168F

Note:Fixedoverheadrate=$243,200/640,000=$0.38perdirectlaborhour

Thespendingvariancesimplycompareswhatshouldhavebeenspentwiththeamountactuallyspent.Onepossibleinterpretationofthevolumevarianceisthatitisameasureoferrorinspecifyingthebudgetedoutput.“Weguessedwrong.”Anotherpossibilityisthatitsignalsagain(loss)fromproducingandsellingmore(less)thanexpected.Ifthebudgetedoutputusedwaspracticalcapacity,thenitalsobecomesameasureofunusedcapacity.However,sincethebudgetedoutputisbasedonexpectedoutputandnotpracticaloutput,thefirsttwointerpretationsaremoreappropriateforthisexample.

2. Variableoverheadanalysis:

AppliedVariable

Overhead

SVOR×SH

=$0.75×(4×163,400)

=$490,200

BudgetedVariable

Overhead

SVOR×AH

=$0.75×655,000

=$491,250

ActualVariable

Overhead

=$496,750

Spending

Variance

$5,500U

Efficiency

Variance

$1,050U

Note:Variableoverheadrate=($723,200–$243,200)/640,000=$0.75perdirectlaborhour.

Exercise9–1