STUDENT SOLUTIONS MANUAL

CHAPTER 13 THE FLEXIBLE-BUDGET AND STANDARD COSTING: DIRECT MATERIALS AND DIRECT LABOR
EXERCISES 13-34 Flexible Bu !e" #$ %#&i#$'e( (30 min) 1. Flexible budget for June, at 90% of the master-budget level !nits sold "ales (90% x #$00,000) 'ariable ex(enses (90% x #)*0,000) +ontribution margin Fixed ex(enses ,udgeted o(erating in-ome &. .efer to text /xhibit 13.1 for master-budget data a. "ales volume varian-e, in terms of operating income 0 flexible-budget o(erating in-ome master (stati-) budget o(erating in-ome 0 #11*,000 - #&00,000 0 )3+,---U or, budgeted -m2unit x (a-tual sales volume - master budget sales volume) 0 #3*02unit x (900 - 1,000) units 0 )3+,---U b. "ales volume varian-e, in terms of contribution margin 0 flexible-budget -ontribution margin - master (stati-) budget -ontribution margin 0 #31*,000 - #3*0,000 0 )3+,---U 900 #%&0,000 )0*,000 #31*,000 1*0,000 )1*+,---

or, budgeted -m2unit x (a-tual master budget) sales volume 0 #3*02unit x (900 1,000) units 0 )3+,---U 3. 3-tual 4(erating .esults For the 5onth of June "ales (900 x #$)0) 6otal variable ex(enses +ontribution margin Fixed ex(enses 4(erating in-ome Blocher, Stout, Cokins, Chen, Cost Management, 4/e 13-1 #%*1,000 )1),000 #3)&,000 1$0,000 #11&,000
The McGraw-Hill Companies, 2 !

STUDENT SOLUTIONS MANUAL 13-34 (+ontinued) a" 6otal flexible-budget varian-e 0 a-tual o(erating in-ome - flexible-budget o(erating in-ome 0 #11&,000 - #11*,000 0 )3,---U b. 6otal variable -ost flexible-budget varian-e 0 a-tual variable -osts 7 flexiblebudget variable -osts 0 #)1),000 - #)0*,000 0 ).,---U or, 38 x (39 - "9) 0 900 units x (#)10 - #)*0)2unit 0 ).,---U -. 6otal fixed -ost flexible-budget varian-e 0 a-tual fixed -osts 7 flexible-budget fixed -osts 0 #1$0,000 - #1*0,000 0 )3-,---U d. "elling (ri-e varian-e 0 a-tual sales revenue 7 flexible-budget sales revenue 0 #%*1,000 - #%&0,000 0 )3*,---F or, 38 x (39 - "9) 0 900 units x (#$)0 - #$00) 0 )3*,---F

:46/ total flexible-budget varian-e ( )3,---U) 0 selling (ri-e varian-e ( )3*,---F) ; total variable -ost flexible-budget varian-e ( ).,---U) ; total fixed -ost flexiblebudget varian-e ()3-,---U). 6he follo<ing (resentation, similar to text Ex/ibi" 130+, might be useful for in--lass (resentation (ur(oses "+=5>?6 53+=>:/.@ +4593:@ 3nalAsis of 4(erating .esults June &00% Flexible A'"u#l !nit sales 900 "ales (900 x #$)0) 6otal variable ex(enses +ontribution margin Fixed ex(enses 4(erating in-ome Bu !e" 900 #%*1,000 )1),000 #3)&,000 1$0,000 #11&,000 S"#"i' 1M#("e&2 Bu !e" 1,000 #%&0,000 )0*,000 #31*,000 1*0,000 #11*,000 #3$,00! Flexible-budget 'arian-e #3,000! "ales 'olume 'arian-e #3*,000!

#$00,000 )*0,000 #3*0,000 1*0,000 #&00,000

6otal 5aster ("tati-) ,udget 'arian-e

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-2

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL 13-3* 1. !nits "ales 'ariable -osts 5anufa-turing "elling B 3dmin. 6otal variable -osts +ontribution margin Fixed -osts 5anufa-turing "elling B 3dmin. 6otal fixed -osts #&),000 4(erating in-ome
1

Flexible Bu !e"( #$ %#&i#$'e A$#l3(i( (&* minutes) Flexible"ales ,udget Flexible 'olume 5aster 3-tual 'arian-e ,udget 'arian-e ,udget 3,$00 -03,$00 &00! ),000 #*3,&00 #19,000 %,%00 #&1,%00 #&1,*00 #11,000 10,000 #&1,000 # *00 #3,$00! #3,$00! 100! #3,900! )4,4--U #1,000! 1,000! #&,000! ).,4--U #*%,000 #1*,&00 %,100 #&&,$00 #3),&00 #1*,000 9,000 #&),000 #10,&00 )1,5--U
1

#3,000! #$00F )00F 1,&00F )1,5--U

#10,000 #11,000 $,000 #&),000 #31,000 #1*,000 9,000 - 0 #1&,000

& 3

,udgeted selling (ri-e (er unit x number of units sold 0 (#10,0002),000) x 3,$00 units 0 #1* (er unit x 3,$00 units 0 #*%,000 "tandard variable manufa-turing -ost (er unit x number of units sold 0 (#11,0002),000) x 3,$00 units 0 #) variable manufa-turing -ost (er unit x 3,$00 units 0 #1*,&00 "tandard variable selling and administrative ex(ense (er unit x number of units 0 (#$,0002),000) x 3,$00 units 0 #& (er unit x 3,$00 units 0 #%,100 #3),&00 - #31,000 0 #10,&00 - #1&,000 0 #&1,*00 - #3),&00 0 #*00 - #10,&00 0 )1,5--U )1,5--U )4,4--U ).,4--U

&

"ales volume varian-es >n terms of -ontribution margin >n term of o(erating in-ome Flexible-budget varian-es +ontribution margin 4(erating in-ome

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-3

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-3* (-ontinued) &. 6he -om(anA redu-ed its selling (ri-e (from #1* (er unit to #1) (er unit) to -om(ete in the marCet, suggesting that the firm is (ursuing a -ost-leadershi(, not differentiation, -om(etitive strategA for the (rodu-t. =o<ever, the -om(anA failed to exer-ise (ro(er -ontrol of its o(erating -osts, as indi-ated bA unfavorable varian-es for manufa-turing and for selling and administrative -osts. 6he ex-ess -osts redu-ed the flexible-budget o(erating in-ome of the (eriod bA 9* (er-ent. !nless the -om(anA -an get its -osts under -ontrol, it <ill liCelA not be able to -om(ete su--essfullA as a -ost leader or lo<--ost (rodu-er. 6he -om(anA has unfavorable selling (ri-e and sales-volume varian-es. /ven though the -om(anA redu-ed its selling (ri-e, it failed to attain the budgeted sales volume. 6he strategA of -om(eting through redu-ed selling (ri-es to gain sales has a((arentlA failed. 3. 3n /x-el s(readsheet solution file is embedded belo<. @ou -an o(en this DobEe-tF bA doing the follo<ing 1. .ight -li-C anA<here in the <orCsheet area belo<. &. "ele-t D<orCsheet obEe-tF and then sele-t D4(en.F 3. 6o return to the Gord do-ument, sele-t DFileF and then D+lose and return to...F <hile Aou are in the s(readsheet mode. 6he s-reen should then return Aou to the Gord do-ument.
13-3*: Flexible Bu !e"( #$ %#&i#$'e A$#l3(i( I$6u" A&e# I"e7 !nits sold "ales revenue 'ariable manufa-turing -osts 'ariable selling B administratuve -osts Fixed manufa-turing -osts A'"u#l Re(ul"( 3,$00 #*3,&00 #19,000 #%,%00 #11,000 M#("e& Bu !e" ),000 #10,000 #11,000 #$,000 #1*,000 A'"u#l Pe& U$i" #1).00 #*.00 #&.03 Bu !e"e Pe& U$i" #1*.00 #).00 #&.00

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-#

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-35 1A66e$ ix2: 89u&$#l E$"&ie( (10 minutes) 4-t. % 5aterials >nventorA (%&0 lbs. x #)02lb.) 5aterials Purchase 9ri-e 'arian-eH9'+ (%&0 I #12lb.) 3--ounts 9aAable (%&0 lbs. x #)12lb.) 9ur-hased %&0 (ounds of 9'+ at #)12lb.J standard (ri-e 0 #)02lb. 4-t. 9 GorC-in-9ro-ess >nventorA (%$0 units x #)02unit) 5aterials !sage 'arian-eH9'+ 5aterials >nventorA (%&0 lbs. x #)02lb.) #31,&00 #&,)00 #&$,$00 #&$,$00 #%&0 #&9,*&0

>ssued %&0 (ounds of 9'+ for the (rodu-tion of %$0 units of I'-1. "tandard usage is 1 lb. (er unit of I'-1, at #)0 (er (ound.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-$

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-4- M#"e&i#l( %#&i#$'e(:;9&<i$! B#'<=#& ( (1* minutes) 3-tual Purchases at 3-tual +ost (38) x (39) )0,000 lbs. x 39 0 #1&0,000 3-tual Purchases at "tandard +ost (38) x ("9) )0,000 lbs. x #3.*02lb. 0 #1)0,000

9ur-hase 9ri-e 'arian-eK 3-tual Usage at "tandard +ost (38) x ("9) 3$,000 lbs. x #3.*02lb. #1,*00 ! !sage 'arian-e 1. 9ur-hase (ri-e (er (ound for dire-t materials #1&0,000 )0,000 lbs. 0 )30-- 6e& lb0 &. 6otal a-tual -ost of dire-t materials (ur-hased 6otal dire-t materials (ur-hased ((ounds) "tandard -ost (er (ound of dire-t materials ?ire-t materials purchase (ri-e varian-e x 6otal standard -ost of dire-t materials (ur-hased )0,000 3.*0 1)0,000 ) >-,---F #1&0,000 Flexible-,udget 3mount ("8) x ("9) "8 x #3.*02lb.

3. 6otal dire-t materials used at standard -ost 0 3$,000 x #3.*0 0#133,000 Less unfavorable dire-t materials usage varian-e "tandard ?5 -ost for the units manufa-tured 0 "tandard -ost (er lb. of dire-t material 6otal standard MuantitA of ?5 for the units 5anufa-tured lb(0 0 7 1,*00 #3.*0 3*,143 #1&1,*00

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-%

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-4> Be/#?i9&#l C9$(i e&#"i9$( (1*-&0 minutes) 1. 5anagerial time -an be -onsidered a s-are resour-e. 6ime s(ent in terms of se-uring o(erational -ontrol detra-ts from time s(ent dealing <ith issues of a more strategi- (or long-term) nature. For this reason, manA managers embra-e a managerial (hiloso(hA Cno<n as Dmanagement bA ex-e(tion.F Ghen varian-es (e.g., labor -ost varian-es) are -onsidered immaterial, no intervention on the (art of management is reMuired the underlAing sAstem is -onsidered to be Din -ontrol.F Ghen the varian-es are -onsidered DlargeF or Dmaterial,F some Cind of intervention on the (art of management is suggested. >n short, therefore, timelA re(orting of standard -ost varian-es allo< managers to taCe -orre-tive a-tion before -osts (and the underlAing sAstem) get out of -ontrol. 3 breaCdo<n (de-om(osition) of varian-es dire-ts managementNs attention to the underlAing sour-e of anA o(erating (roblems. 3ssuming standards are DinternaliOed,F theA maA (ro(erlA motivate em(loAees to <orC more effi-ientlA, an im(ortant element of D-ontrol.F &. 3 standard -ost sAstem -an have a negative im(a-t on <orCer motivation if the standards are too DlooseF (i.e., too easilA attainable) or too DtightF (i.e., too diffi-ult to attain). >n the former -ase, the standards tend to redu-e (rodu-tivitAJ in the latter -ase, in the extreme, em(loAees sim(lA ignore the standardsHthat is, theA do not DinternaliOeF the standards as legitimate goals. "ome resear-h in management -ontrol sAstems suggests that if standards are set <ithout <orCer in(ut the standards <ill not be a--e(ted as realisti- bA these <orCers. FinallA, standards should not, as in the -ase of +hen, >n-., be used to assign Dblame.F .ather, theA should be used (ositivelA to motivate -ontinual o(erating im(rovements.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-&

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-44 M#"e&i#l( %#&i#$'e(:89u&$#l E$"&ie( (&0 minutes)

3-tual Purchases at 3-tual +ost (38) x (39) $,300 lbs. x #2lb. 0K Purchase

3-tual Purchases at "tandard +ost (38) x ("9) (38) x #*.102lb. 0K 9ri-e 'arian-e 0 K 3-tual Usage at "tandard +ost (38) x ("9) (38) x #*.102lb. 0K Flexible-,udget 3mount ("8) x ("9) ("8) x #*.102lb. 0K

!sage 'arian-e 0 K 1. 8uantitA of materials used 0 (38) 0 materials (ur-hased - in-rease in ending inventorA of materials 0 $,300 - *00 0 %,$00 lbs. "tandard MuantitA of dire-t materials for the units (rodu-ed this (eriod 0 ("8) 0 &,000 units (rodu-ed x ) lbs. (er unit 0 $,000 (ounds

6herefore, the dire-t materials usage varian-e 0 (38 7 "8) x "9 0 (%,$00 lbs. - $,000 lbs.) x #*.102lb. 0 )1,->-F 6he dire-t materials purchase (ri-e varian-e 0 6otal dire-t materials varian-e 7 materials usage varian-e 0 #1)0 ! ; #1,0&0 F 0 )1,**-U

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-!

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL 13-44 (+ontinued)

&. 3-tual -ost of dire-t materials (er (ound (39) dire-t materials purchase (ri-e varian-e 0 (39 - "9) x 38 #1,110 0 (39 - #*.10)2lb. x $,300 lbs. 39 0 #*.10 ; #0.&0 0 )+03-@lb0 3. (3((endix) Journal entries 5aterials >nventorA ($,300 lbs. x #*.102lb.) 5aterials (ur-hase (ri-e varian-e #*.302lb.) #)3,990 #)&,330 #1,110 3--ounts (aAable ($,300 lbs. x

6o re-ord (ur-hase of $,300 lbs. of dire-t materials a-tual -ost (er (ound 0 #*.30J standard -ost (er (ound 0 #*.10. G>9 >nventorA ($,000 lbs. x #*.102lb.) #)0,$00 5aterials usage varian-e #1,0&0 5aterials inventorA #39,%$0

(%,$00 lbs. x #*.102lb.)

6o re-ord the standard dire-t materials -ost for the &,000 units (rodu-ed this (eriod.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-'

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL

13-4*

De"e&7i$i$! S"#$ #& Di&e'" M#"e&i#l( C9(" (* minutes) 6otal lbs. of :atura (er (a-Cage of ""-& "tandard (ur-hase (ri-e (er (ound of :atura 6otal (ur-hase (ri-e before (ur-hase dis-ount 9ur-hase dis-ount (3% x #10.00) "tandard dire-t material -ost (er (a-Cage of ""-& 1& lbs. x #*.00 #10.00 1.$0 )+50>-

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL 13-45 Fi$#$'i#l ?e&(u( O6e&#"i9$#l C9$"&9lA Be/#?i9&#l C9$(i e&#"i9$( i$ "/e S"#$ #& -Se""i$! P&9'e(( (&0 minutes) 3s indi-ated in the text, <e use the term Dmanagement a--ounting and -ontrol sAstemF to refer to the entire set of (ro-edures and sAstems used bA an organiOation to monitor a-tivities and guide a-tions in su((ort of the overall goals and obEe-tives of the organiOation. 3s su-h, a -om(rehensive management a--ounting and -ontrol sAstem -ontains both a planning component (e.g., o(erational and finan-ial budgets -overed in +ha(ter $) and a feedback/ assessment component (-overed in 9art Four of the text). Ghile terminologA maA differ a-ross textbooCs and organiOations, one useful <aA to -on-e(tualiOe feedba-C2 (erforman-e evaluation sAstems is to vie< su-h sAstems as -onsisting of t<o (rimarA -om(onents a financial control system and an operational control system. 6he goal of the former sAstem is to monitor finan-ial results to determine <hether the organiOation is on-tra-C in terms of its s(e-ified finan-ial goals. 6he goal of the latter sAstem is to monitor nonfinan-ial (erforman-e indi-ators asso-iated <ith the o(erating fa-tors -onsidered -riti-al to the organiOation for a-hieving a -om(etitive advantage. 4ne dimension of a finan-ial -ontrol sAstem is the use of flexible-budgets, standard -osts, and varian-e analAsisH-overed in +ha(ters 13 and 1) of the text. >n essen-e, su-h (ro-edures assess both effectiveness (e.g., did <e attain budgeted o(erating (rofits or budgeted sales volume for the (eriod) and efficiency as(e-ts of finan-ial (erforman-e (e.g., <hether the (ur-hasing de(artment se-ured a favorable (ri-e for materials (ur-hased for (rodu-tion, or <hether the organiOation used labor resour-es effe-tivelA during the (eriod). 3s indi-ated in -ha(ter 13, all (urelA variable -osts -an be de-om(osed into a (ri-e varian-e -om(onent and an effi-ien-A (MuantitA) varian-e -om(onent. :o management a--ounting and -ontrol sAstem is good or bad per se. /a-h is Eudged, at least -on-e(tuallA, bA -om(aring -osts and benefits. 3mong the more im(ortant -onsiderations are behavioral -onsiderations. For exam(le, one -onsideration relates to the standard-setting (ro-ess. "hould standards be im(osed (authoritative), should em(loAees <hose (erforman-e <ill be Eudged develo( the standards ( participative), or should the organiOation use a consultative (ro-ess in develo(ing su-h standardsK

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-11

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-+- S"#$ #& L#b9& R#"e #$ L#b9& EBBi'ie$'3 %#&i#$'e (10-1* minutes) 3-tual >n(uts at 3-tual +ost (38) x (39) 11,000 hrs. x #30.002hr. 0 #330,000 #33,000F Labor Rate 'arian-e 3-tual >n(uts at "tandard +ost (38) x ("9) 11,000 hrs. x ("9) 0 K K Labor Efficiency 'arian-e Flexible-,udget 3mount ("8) x ("9) 1&,000 hrs. x ("9) 0 K

1.

6otal a-tual dire-t labor hours <orCed 3-tual hourlA rate 6otal a-tual total dire-t labor -ost 9lus Favorable dire-t labor rate varian-e 6otal a-tual dire-t labor hours at standard hourlA rate 6otal a-tual dire-t labor hours <orCed "tandard dire-t labor rate (er hour x ;

11,000 #30.00 #330,000 33,000 11,000 )330-#313,000

&. ?ire-t labor efficiency varian-e 0 a-tual hours at standard -ost 7 standard labor -ost for units (rodu-ed 0 P(38) x ("9)Q - P("8) x ("9)Q 0 P11,000 hrs. x #332hourQ - P1&,000 hrs. x #332hr.Q 0 )33,---F or 0 (38 - "8) x "9 0 (11,000 - 1&,000) hrs. x #33.002hr. 0 )33,---F

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-12

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-+>

L#b9& %#&i#$'e( #$ 89u&$#l E$"&3 (1*-&0 minutes) 3-tual >n(uts at 3-tual +ost (38) x (39) &0,000 hrs. x (39) 0 #3%$,000 #1,000! Labor Rate 'arian-e 3-tual >n(uts at "tandard +ost (38) x ("9) &0,000 hrs. x ("9) 0 K K Labor Efficiency 'arian-e Flexible-budget 3mount ("8) x ("9) ("8) x ("9) 0 K

1. "tandard dire-t labor hourlA rate 6otal (aAroll (38 x 39) !nfavorable dire-t labor rate varian-e ?ire-t labor hours <orCed R standard rate2hr. 3-tual dire-t labor hours (38) "tandard dire-t labor hourlA rate ("9) &. ?ire-t labor effi-ien-A varian-e ,udgeted total dire-t hours ,udgeted units to manufa-ture "tandard dire-t labor hours (er unit 6otal units manufa-tured 6otal standard hours for units manufa-tured ?ire-t labor effi-ien-A varian-e 0 (38 - "8) x "9 0 (&0,000 - 1$,000) hrs. x #1$.102hr. 3. (3((endix) Journal /ntrA for Labor +ost, JanuarA G>9 >nventorA (1$,000 hrs. x #1$.10) ?L rate varian-e ?L effi-ien-A varian-e Gages (aAable (&0,000 x #1$.902hr.) #33),)$0 #1,000 #3%,&00 #3%$,000 0 )34,>-- U of out(ut x &),000 $,000 3 1,000 1$,000 7 #3%$,000 1,000 #3%&,000 &0,000 )150*-

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-13

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL 13-+4 L#b9& R#"e #$ EBBi'ie$'3 %#&i#$'e( (&0 minutes) 3-tual >n(uts at 3-tual +ost (38) x (39) 38 x #1$.002hr. 0 #&0%,000 K Labor .ate 'arian-e 1. 3-tual >n(uts at "tandard +ost (38) x ("9) 38 x #11.002hr. 0 K K Labor /ffi-ien-A 'arian-e Flexible-,udget 3mount ("8) x ("9) 10,000 x 1.*) x #11.00 0 #&)0,000

?ire-t labor rate varian-e ?ifferen-e in hourlA <age rates 3-tual dire-t labor <age rate (39) "tandard dire-t labor <age rate ("9) 3-tual dire-t labor hours <orCed (38) 3-tual dire-t labor -osts #&0%,000 3-tual dire-t labor hourlA rate (39) 3-tual dire-t labor hours <orCed (38) ?ire-t labor rate varian-e )>3,---U ?ire-t labor efficiency varian-e 3-tual dire-t labor hours <orCed (38) 6otal standard dire-t labor hours allo<ed for the units manufa-tured ("8) :umber of finished units manufa-tured "tandard dire-t labor hours (er unit S ?ifferen-e in dire-t labor hours (38 - "8) "tandard dire-t labor hourlA <age rate ("9) ?ire-t labor efficiency varian-e

#1$.00 - 11.00 #1$.00

#&.00!

x 11,*00

&.

11,*00 10,000 x 1.*

1*,000 3,*00F x #11.00 )+*,---F

3.

>f the unfavorable rate varian-e is a result of the (rodu-tion managerNs de-ision to em(loA <orCers <ith higher sCill levels, then the (rodu-tion manager made a right de-ision to do so. 6he favorable efficiency varian-e more than offsets the higher <ages (aid to these sCilled <orCers. ?ire-t labor rate varian-e #&3,000! ?ire-t labor efficiency varian-e 6otal dire-t labor varian-e #33,000F *1,000F

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1#

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-+* 1A66e$ ix2: S"#$ #& C9("i$! #$ 89u&$#l E$"&ie( (&0 minutes) 5aterials >nventorA (1,000 gals. x #10.002gal.) #10,000 9ur-hase 9ri-e 'arian-e #&,%00 3--ounts 9aAable (1,000 gals. x #10.)*2gal.) #1&,%00 6o re-ord, on o(en a--ount, dire-t materials 1,000 gals. R standard -ost of #10.002gal. 3-tual -ost (er gallon 0 #10.)*. G>9 >nventorA (&,*00 x & gals. x #102gal.) 5aterials !sage 'arian-e (100 gals. x #102gal.) 5aterials >nventorA (*,100 gals. x #102gal.) #*0,000 #1,000 #*1,000

6o re-ord the standard dire-t materials -ost (#&02unit) for the -om(leted (rodu-tion of the (eriod (&,*00 units (rodu-ed). G>9 >nventorA (&,*00 x & hrs. x #&*2hr.) #1&*,000 Labor .ate 'arian-e (#*.*02hr. x ),900 hrs.) #&1,9*0 Labor /ffi-ien-A 'arian-e (100 hrs. x #&*2hr.) #&,*00 Gages 9aAable (),900 hrs. x #19.*02hr.) #9*,**0 6o re-ord the standard dire-t labor -ost (#*02unit) of the -om(leted (rodu-tion for the (eriod (&,*00 units (rodu-ed) and the a-tual labor -osts in-urred for the (eriod. Finished Toods >nventorA (#%0 x &,*00 units) #1%*,000 G>9 >nventorA #1%*,000 6o re-ord the dire-t manufa-turing -ost -om(onent of -ost of goods manufa-tured for the (eriod. +T" (#%02unit x &,000 units) #1)0,000 Finished Toods >nventorA #1)0,000 6o re-ord the dire-t manufa-turing -ost -om(onent of the -ost of goods sold (+T") for the (eriod. 3--ounts .e-eivable (#1*02unit x &,000 units) #300,000 "ales .evenue #300,000 6o re-ord sales revenue and asso-iated a--ounts re-eivable for the (eriod.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1$

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-+5 Di&e'" L#b9& %#&i#$'e( (1* minutes) 3-tual >n(uts at 3-tual +ost (38) x (39) 1$,000 hrs. x 39 #*0.002hr. K Labor Rate 'arian-e 3-tual >n(uts at "tandard +ost (38) x ("9) 1$,000 hrs. x #*0.002hr. # Labor Efficiency 'arian-e Flexible-,udget 3mount ("8) x ("9) 11,000 hrs. x

Flexible-,udget 'arian-e for ?ire-t Labor #&0,000F 1. ?ire-t Labor Efficiency varian-e 0 (38 - "8) x "9 0 (1$,000 - 11,000) hrs. x #*02hr. 0 )1--,---U &. 6otal Flexible-,udget 'arian-e 0 .ate varian-e ; /ffi-ien-A varian-e .ate varian-e 0 6otal varian-e - /ffi-ien-A varian-e 0 #&0,000F - #100,000! 0 )1>-,---F 3. 3-tual dire-t labor hours (38) "tandard dire-t labor rate (er hour ("9) 6otal a-tual dire-t labor hours at the standard rate ?ire-t labor rate varian-e7Favorable 6otal dire-t labor (aAroll in 5aA (38 x 39) 7 x 1$,000 #*0.00 #900,000 1&0,000 )45-,---

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1%

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-*- S"#$ #& Di&e'" L#b9& C9(" Pe& U$i" (10 minutes) 6otal hours (aid (er <eeC (er em(loAee =ourlA <age rate GeeClA <ages (er em(loAee /m(loAee benefits ()0%) 6otal <eeClA (aAroll -ost (er em(loAee GeeClA (rodu-tive hours (er em(loAee ?ire-t labor -ost (er (rodu-tive hour :umber of standard dire-t labor hours (er unit "tandard dire-t labor -ost (er unit of out(ut x ; x )0 #30 #1,&00 )$0 #1,1$0 3* #)$ 3 )144

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1&

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-*> S"#$ #& C9("( #$ E"/i'( (1* 5inutes) 3s -ontroller of the -om(anA, 5arANs behavior is not ethi-al. !nder the Credibility standard, 5arA has an obligation to -ommuni-ate information fairlA and obEe-tivelA. Further, under the Credibility standard she has a res(onsibilitA to (re(are -om(lete and -lear re(orts and re-ommendations. 6hat is, she must dis-lose the (ri-e information sin-e this information -ould reasonablA be ex(e-ted to influen-e the o<nerNs de-ision-maCing. ,A intentionallA misre(resenting the a-Muisition -ost of a((le Eui-e, 5arA ho(es to su((ort her friendNs business, but at the ex(ense of her em(loAer, 434, >n-. !nder the Integrity standard, 5arA should avoid this -onfli-t of interest ((ersonal loAaltA versus loAaltA to the -om(anA for <hi-h she <orCs) bA (1) not being the (erson <ho sets the standard -ost for the a((le Eui-e, and (&) not restri-ting sour-e of su((lA (e.g., bA mandating that a((le Eui-e must be (ur-hased from her friendNs business).

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1!

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

PROBLEMS 13-*4 S"#$ #& C9(" S3("e7(:Be/#?i9&#l C9$(i e&#"i9$( (30 minutes) 1. a. 6he maEor advantages of using a standard -ost sAstem in-lude ,udgeting. "tandard -osts -an be the building blo-Cs for budget (re(aration and allo< the develo(ment of flexible-budgets. 9erforman-e evaluation. +om(arisons of a-tual -osts to standard -osts fa-ilitate evaluation of the (erforman-e at the -om(anA, de(artment, -ost -enter, or individual level. "tandards also allo< em(loAees to more -learlA understand <hat is ex(e-ted of them. 5otivation. >f DinternaliOedF (i.e., a--e(ted) bA o(erating (ersonnel, the standards -an motivate a-tions that hel( the organiOation a-hieve its strategi- obEe-tives. .e-ordCee(ing. 3 standard -ost system redu-es re-ordCee(ing -osts and fa-ilities inventorA -ontrol (i.e., items need be maintained in (hAsi-al Muantities onlA).

b. 6he disadvantages2-hallenges that -an result from using a standard -ost sAstem in-lude the follo<ing +ost standards that are too tight -an -ause the em(loAees to ignore the standards, or <orse, have negative behavioral im(li-ations leading to undesirable a-tions. "tandards maA ignore Mualitative -hara-teristi-s and Eeo(ardiOe (rodu-t MualitA. +hanging manufa-turing environment. 6he -ost stru-ture of manA manufa-turing firms has -hanged dramati-allA (-om(ared to the (ast). 3s a -onseMuen-e, standards and asso-iated varian-es for -ontrolling labor -osts are less im(ortant todaA. Fo-us on -ost-drivers. 3s a -orollarA to the above -omment, manA strategi-ost management sAstems todaA are fo-using on the identifi-ation of the fa-tors that drive (rodu-tion -osts (e.g., bat-h-level and -ustomer-level -osts).

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-1'

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-*4 (+ontinued) &0 3 standard -ost sAstem must be su((orted bA to( management to be su--essful. =o<ever, the (arties that should (arti-i(ate in the standard-setting (ro-esses in-lude all levels of the organiOation, (i.e., (ur-hasing, engineering, (rodu-tion, and -ost a--ounting). 6he value of their (arti-i(ation is that theA are more liCelA to a--e(t the standards as an evaluation -riterion. 3. 6he general features and -hara-teristi-s asso-iated <ith the introdu-tion and o(eration of a standard -ost sAstem that maCe it an effe-tive tool for -ost -ontrol in-lude the follo<ing. "tandard-setting -an be a (arti-i(ative (ro-ess <ith those individuals most familiar <ith the variables asso-iated <ith standard-setting available to (rovide the most a--urate information. 6his sense of (arti-i(ation <ill hel( establish the legitima-A of the standards and give the (arti-i(ants a greater feeling of being (art of the o(eration. "tandards that are set for routine a-tivities, <hi-h -an be identifiable and measurable, -an be asso-iated <ith s(e-ifi- -ost fa-tors of uniform (rodu-ts in long (rodu-tion runs. "tandards (romote -ost -ontrol through the use of varian-e analAsis and (erforman-e re(orts, similar to those dis-ussed in +ha(ters 13 and 1).

). 6he -onseMuen-es of having the standards set bA an outside -onsulting firm are the follo<ing 6here -ould be negative em(loAee rea-tion as the em(loAees did not (arti-i(ate in the standard-setting (ro-ess. 6here -ould be dissatisfa-tion if the standards -ontain -ost elements that are not -ontrollable bA the (rodu-tion grou(s <ho <ould be held res(onsible for unfavorable varian-es. The outsi(e )irm ma* not )ull* un(erstan( the manu)acturin+ process, this coul( result in poor mana+ement (ecisions -ase( on )ault* in)ormation"

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-** S"#$ #& C9(" S/ee" #$ U(e 9B %#&i#$'e D#"# (30-)0 minutes) 1. "tandard -ost for ea-h ten-gallon bat-h of ras(berrA sherbet 1#2 "tandard 8uantitA ?ire-t materials .as(berries 4ther ingredients ?ire-t labor "orting ,lending 9a-Caging (%.* Mts.U (10 gal. (3 min. x 1 Mts.)210 (1& min.2 10) ()0 Mts.UU x x x x x 1b2 "tandard .ate #).00) 0 #30.00 #&.&*) 0 #1*.00 0 #1*.00 0 #0.*0) 0 &&.*0 ).*0 3.00 %.*0 &0.00 )5-0-#*&.*0

-. "tandard -ost (er ten-gallon bat-h

0 UP1 Muarts2bat-h x ();1)Q2) 0 %.* Muarts of in(uts reMuired to obtain 1 a--e(table Muarts. UU) Muarts (er gallon x 10 gallons 0 )0 Muarts. &. a. >n general, the (ur-hasing manager is held res(onsible for unfavorable materials (ur-hase (ri-e varian-es. +auses of these varian-es in-lude the follo<ing Failure to -orre-tlA fore-ast (ri-e in-reases. 9ur-hasing nonstandard materials or in une-onomi-al lots. 4utdated (i.e., ina((ro(riate) standard. 6rans(ort of materials other than method (e.g., se-ond-daA deliverA) embodAing in the standard (ri-e. :ot (ur-hasing from su((liers offering the most favorable terms. Teneral ma-ro-e-onomi- fa-tors affe-ting (ri-es.

>n some situations, ho<ever, someone other than the 9ur-hasing 5anager maA be res(onsible for the (ri-e varian-e. For exam(le, an ex(edited shi(ment of materials, <ith asso-iated higher shi((ing -ost, -ould be the result of a rush order a--e(ted bA the "ales ?e(artment and as su-h not assigned to the 9ur-hasing 5anager.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-21

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-** (+ontinued) 3s a small (rodu-er, +oldVingNs -om(etitive strategA is liCelA to be differentiation through brand re-ognition, Eust as the firm has a((arentlA been doing. 6he su--ess of the -om(etitive strategA reMuires that the firm maintains high MualitA and good -ost -ontrol. !nfavorable (ri-e varian-es de-rease the (rofit of the firm and, unless -orre-ted in the short run, maA -om(romise the firmNs -om(etitive (osition and the survival of the firm in the long-run. b. >n general, the (rodu-tion manager or foreman is held res(onsible for unfavorable labor effi-ien-A varian-es. +auses of these varian-es in-lude the follo<ing 9oorlA trained labor "ubstandard, ineffi-ient, or im(ro(erlA set eMui(ment >nadeMuate su(ervision !se of sub-standard material in(uts 4utdated standard

!nfavorable effi-ien-A varian-es in-rease -osts, de-rease (rofits, and maA affe-t the MualitA of the firmNs (rodu-ts. +ontinuous unfavorable effi-ien-A varian-es Eeo(ardiOe the -om(etitive (osition of the firm and threaten the su--ess of the firmNs strategA. N9"e: one issue to raise here is the danger of too mu-h fo-us on the labor effi-ien-A varian-e. For exam(le, in manA -ases todaA, labor is a short-term fixed -ost. 6hus, a (rin-i(al -ause of an unfavorable labor effi-ien-A varian-e is la-C of sales orders2(rodu-tion demand, not <orCer effi-ien-AW 6he onlA <aA a manager in this situation -an avoid an unfavorable labor effi-ien-A varian-e is to (rodu-e ex-ess inventorA, <hi-h <ould be -ounter to the J>6 (hiloso(hA that manA organiOations are (ursuing todaA. 6he moral here is that <hen the <orCfor-e is basi-allA fixed in the short run, labor effi-ien-A varian-es have to be inter(reted <ith -aution. For this reason, some <riters have advo-ated doing a<aA <ith the re(orting of labor effi-ien-A varian-es for -ontrol (ur(oses <hen the labor for-e is essentiallA fixed in the short run.

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-22

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-*5 Fill-i$ Mi((i$! D#"#: P&9Bi"-%#&i#$'e Re69&"( (30 5inutes) 3-tual .esults ,udget !nit sales "ales 'ariable -osts 5anufa-turing "elling B 3dmin. +ontribution margin Fixed -osts 4(erating in-ome 1,6 !"#,$ !%(,% #),000 !(,% !6,% #1,000 Flexible ,udget 'arian-e :23 #1,100! "ales Flexible 'olume ,udget 1,6 !$ , 100F !%,& ' !1,6 ) !% ) 5aster ("tati-) 'arian-e 1,*00 #3%,*00 #&),000 !",

#1,100! !%&,6 !# ) #3,&00 !$, ) !1,$ ' !%,6 ) !11,% !(,6 #3,100

!( ' !1 ,& * * !(,6 !( ' !%,+

1. a B b 3-tual units sold 0 5aster budget units ; Favorable sales volume varian-e 0 1,*00 ; 100 F 0 1,100 units -. ,udgeted selling (ri-e (er unit #3%,*00 1,*00 0 #&* (er unit "ales volume varian-e, in terms of sales revenue d. "ales revenue, flexible-budget e. "ales revenue, a-tual 'ariable manufa-turing -ost f. "tandard -ost (er unit #&),000 1,*00 units 0 #11 (er unit 6otal flexible-budget amount g. "ales volume varian-e (or, 100 units x #112unit 0 #1,100!) h. 3-tual amount in-urred 'ariable selling and administrative ex(ense i. Flexible-budget varian-e E. 5aster-budget amount #),000 - #3,&00 0 (#3,&0021,100 units) x 1,*00 units 0 #$00! #3,000 #&*,100 ; #1,100 ! 0 #&%,&00 1,100 units x #11 0 #&*,100 - &),000 0 #&*,100 #1,100! 100 x #&* 0 1,100 x #&*2unit 0 #)0,000 - #1,100 ! 0 #&,*00F #)0,000 #3$,)00

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-23

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-*5 (+ontinued) C. "ales volume varian-e, in terms of "B3 +ontribution margin l. 3-tual amount m, Flexible-budget varian-e n. Flexible-budget amount or, (. "ales volume varian-e M. 5aster-budget amount (e) #3$,)00 - (h) #&%,&00 - #),000 0 (d) #)0,000 - (f) #&*,100 - #3,&00 0 (l) #%,&00 ; (m) #),000 ! 0 #&,*00 F - #1,100 ! - #&00 ! 0 #3%,*00 - &),000 - (E) 3,000 0 or, (n) #11,&00 - (() #%00 F 0 r. Fixed -ost, a-tual s. Fixed -ost, flexible budget t. Fixed -ost, master (stati-) budget u. Fixed -ost flexible-budget varian-e v. Fixed -ost sales volume varian-e <. 4(erating in-ome flexible-budget varian-e x. 4(erating in-ome, master budget (l) #%,&00 - #1,000 0 (n) #11,&00 -#3,100 0 "ame as (s) (r) #1,&00 - (s) #%,100 0 (s) #%,100 - (t) #%,100 0 #1,000 - #3,100 0 (M) #10,*00 - (t) #%,100 0 #%,&00 #11,&00 #11,&00 #%00F #10,*00 #10,*00 #1,&00 #%,100 #%,100 #1,)00F -0#&,100! #&,900 #1,100 ! ; #1,100 ! ; (i) #$00 ! 0 #),000! #3,&00 - #3,000 0 #&00!

A. "ales volume varian-e, in terms of o(erating in-ome 0 #3,100 - #&,900 0 #%00F or, #%00 - #0 0 #%00F 2" 3-tual selling (ri-e (er unit (e) #3$,)00 (b) 1,100 units 0 )>40--

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2#

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-4- Fill i$ Mi((i$! D#"# (&* minutes) 1. !nit sales "ales 'ariable -osts +ontribution margin Fixed -osts 4(erating in-ome a. - 0 b. 1,&00 (bA definition) -. 1,&00 - 1,000 0 &00F d. ,udgeted selling (ri-e (er unit #10,000 1,000 units 0 #102unit Flexible-budget revenues 0 1,&00 units x #102unit 0 #%&,000 e. #19,100 - #%&,000 0 #&,)00! f. #%&,000 - #10,000 0 #1&,000F g. "tandard (budgeted) variable -ost (er unit #)0,000 1,000 units 0 #)02unit Flexible-budget variable -ost 1,&00 units x #)0 0 #)$,000 h. #)$,000 - #)0,000 0 #$,000! i. #11,&00! - (e) #&,)00! 0 #$,$00! E. (g) #)$,000 ; (i) #$,$00 0 #*1,$00 C. #19,100 - (E) #*1,$00 0 #1&,$00 l, #1&,$00 ; #11,&00 0 #&),000 or, #%&,000 - #)$,000 0 #&),000 m, #1&,000F - #$,000! 0 #),000F, or, ,udgeted -ontribution margin (er unit #102unit - #)02unit 0 #&02unitJ &00 units x #&02unit 0 #),000F n. #10,000 - #)0,000 0 #&0,000 or, 1,000 units x #&02unit 0 #&0,000 (. #1&,$00 7 #*,$00 0 #%,000 M. - 0 - (bA definition, as long as both out(ut levels are <ithin the relevant range) r. #*,000 (0 master budget amount, as long as both out(ut levels are <ithin the relevant range) Blocher, Stout, Cokins, Chen, Cost Management, 4/e
2 !

3-tual .esults 1,&00 #19,100 !&6,# !1%,# !(, #*,$00

Flexible,udget 'arian-e * * !%,$ ) !#,# ) #11,&00! !%, !1",% ) )

Flexible ,udget 1,% !(%, !$#, !%$, !&, !1+,

"ales 'olume 'arian-e % ' !1%, ' !#, ) !$, ' * * !$, '

5aster ("tati-) ,udget 1,000 #10,000 #)0,000 !% , #*,000 !1&,

13-2$

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-4- (+ontinued) s. #%,000 (() - #*,000 (r) 0 #&,000! t. #&0,000 (n) - #*,000 0 #1*,000 u. #),000F (m) -#0 (M) 0 #),000F v, #1*,000 (t) ; #),000 (u) 0 #19,000, or, #&),000 (l) - #*,000 (r) 0 #19,000 -, #*,$00 - #19,000 (v) 0 #13,&00!, or, #11,&00! ; #&,000! (s) 0 #13,&00!

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2%

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-4> Di&e'" L#b9& %#&i#$'e(: ;9&<i$! B#'<=#& ( (&0 minutes) 3-tual 8uantitA at "tandard 9ri-e (38) x ("9) 3-tual =rs. .orked x "td. Gage .ate2=r. (1.11 x "8) x #302hr. 0K Flexible ,udget (F,) ,ased on 4ut(uts ("8) x ("9) "td. =rs. /llo-ed x "td. Gage .ate2=r. ("8) x #302hr. 0K

3-tual Labor +ost (38) x (39) 3-tual =rs. GorCed x 3-tual Gage .ate2=r. (1.11 x "8) x (39) 0K

Labor Rate 'arian-e )11,*--F 1. /ffi-ien-A varian-e 0 (38 - "8) x "9 #&),000 0 (1.11 "8 - "8) x #302hr. 0.11 "8 0 $00 "8 0 +,--- /9u&( &. 3.

Labor Efficiency 'arian-e )>4,---U

38 0 1.11 "8 0 1.11 x *,000 hrs. 0 +,5-- /9u&( Labor rate varian-e 0 (39 - "9) x 38 - #11,100 0 (39 - #30.00)2hr. x *,$00 hrs. 39 - #30.00 0 - #&.00 39 0 )>50--@/&0

). "8 0 :umber of units manufa-tured x "tandard labor hours (er unit *,000 0 :umber of units manufa-tured x & hrs.2unit :umber of units manufa-tured 0 *,000hrs.2&hrs.(er unit 0 >,+-- u$i"(

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2&

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-44 Re?i(i9$ 9B S"#$ #& ( (30 minutes) 1. a. .evising the standards immediatelA <ould fa-ilitate their use in a master budget. !se of revised standards <ould minimiOe (rodu-tion -oordination (roblems and fa-ilitate -ash (lanning. .evised standards <ould fa-ilitate more meaningful -ost-volume-(rofit analAsis and result in sim(ler, more meaningful varian-e analAsis. "tandards are often used in de-ision analAsis su-h as maCe-or-buA, (rodu-t (ri-ing, or (rodu-t dis-ontinuan-e. 6he use of obsolete standards <ould im(air the analAsis. 'arian-es are often -om(uted and then ignored bA de-isionmaCers2 managers. .etaining the -urrent standards and ex(anding the analAsis of varian-es <ould for-e a diagnosis of the -osts and <ould in-rease the liCelihood that signifi-ant varian-es <ould be investigated. b. "tandard -osts are -arried through the a--ounting sAstem in a standard -ost sAstem. .etaining the -urrent standards and ex(anding the analAsis of varian-es <ould eliminate the need to maCe -hanges in the a--ounting sAstem. =o<ever, -hanging standards -ould have an adverse motivational im(a-t on the (ersons using them. .etaining the -urrent standards <ould (reserve the <ellCno<n ben-hmarC and allo< for -onsisten-A in re(orting varian-es throughout the Aear. &. a. +hange in -ost2unit due to the use of ne< dire-t materials +hange due to price 0 (:e< materials (ri-e 7 4ld materials (ri-e) x (:e< materials MuantitA) 0 (#%.%% - #%.00)2lb. x 1 lb.2unit 0 )-044U +hange due to the effe-t of dire-t materials MualitA on dire-t materials usage 0 (4ld materials MuantitA - :e< materials MuantitA) x (4ld materials (ri-e) 0 (1.&* - 1.00) lb.2unit x #%.002lb. 0 )104+F +hange in labor usage due to the effe-t of materials MualitA 0 (4ld labor time - :e< labor time) x (4ld labor rate) 0 (&)210 - &&210) x #1&.102hr. 0 )-04>F 6otal -hanges in (er unit -ost due to use of ne< materials 0 )104-F b. +hanges in (er unit -ost due to the ne< labor -ontra-t0 (:e< <age rate 7 4ld <age rate) x :e< labor time 0 (#1).)0 - #1&.10)2hr. x (&&210) hrs. 0 )-0**U -. 6otal -hange in dire-t manufa-turing -ost (er unit 0 (a) ; (b) 0 )-044F

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2!

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-4* Di&e'" M#"e&i#l(: 89i$" P&i'e-Cu#$"i"3 %#&i#$'e (&* minutes) 1. ?ire-t materials price varian-e 0 38 x (39 - "9) 0 &*,000 tons x (#1& - #10)2ton &. "tandard dire-t materials allo<ed for the units manufa-tured, "8 *,000 units x ).* tons (er unit 0 &&,*00 tons ?ire-t materials usage varian-e 0 "9 x (38 - "8) 0 #102ton x (&*,000 tons - &&,*00 tons) 0 3. D9ureF dire-t materials (ri-e varian-e 0 "8 x (39 - "9) 0 (#1& - #10)2ton x &&,*00 tons 0 ?ire-t materials Eoint (ri-e-MuantitA varian-e 0 (39 - "9) x (38 7 "8) 0 (#1& - #10)2ton x (&*,000 - &&,*00) tons 0 6otal dire-t materials (ri-e varian-e (as determined in (ra-ti-e) 0 38 x (39 7 "9) 0 #*0,000! ; )+,---U #)*,000! )>+,---U )+-,---U

6he (re-eding -al-ulations are illustrated gra(hi-allA belo<

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-2'

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-4* (-ontinued)

S. 4 20/ - S/3

120/ - S/3 4 20. - S.35

0/ S/ S/ 4 20. - S.3 . S. Le!e$ : 39 0 a-tual (ri-e (er ton of ra< material "9 0 standard (ri-e (er ton of ra< material 38 0 a-tual tons of ra< material used in (rodu-tion "8 0 standard X of tons allo<ed for the out(ut a-hieved "8 x (39 - "9) 0 D(ureF (ri-e varian-e "9 x (38 - "9) 0 D(ureF MuantitA varian-e (39 - "9) x (38 7 "8) 0 DEointF (ri-e-MuantitA varian-e :ote that in (ra-ti-e the Eoint (ri-e-MuantitA varian-e is usuallA in-luded as (art of the (ri-e varian-e under the assum(tion that (ri-e (aid is less -ontrollable than MuantitA -onsumed in the (rodu-tion (ro-ess. 6hat is, there is a desire to Cee( the effi-ien-A varian-e as D(ureF as (ossible. 0. Blocher, Stout, Cokins, Chen, Cost Management, 4/e
2 !

13-3

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-45 P&9Bi"-%#&i#$'e A$#l3(i( (10 - %* minutes) 1. 3-tual .esults ),000 #390,000 #&)1,000 #39,000 #&$0,000 #*0,000 #)0,000 #90,000 #&0,000 Flexible ,udget 'arian-es 0 #10,000! #)1,000! #1,000F #)0,000! #0 #),000! #),000! #*),000! "ales Flexible 'olume ,udget 'arian-e ),000 100F #)00,000 #10,000F #&00,000 #)0,000 #&)0,000 #*0,000 #31,000 #$1,000 #%),000 #*,000! #1,000! #1,000! #0 #0 #0 #),000F 5aster ("tati-) ,udget 3,900 #390,000 #19*,000 #39,000 #&3),000 #*0,000 #31,000 #$1,000 #%0,000

!nit sales "ales 'ariable +osts 5anufa-turing 5arCeting 6otal 'ariable +osts Fixed +osts 5anufa-turing 5arCeting 6otal Fixed +osts 4(erating >n-ome

6otal 5aster ("tati-) ,udget 'arian-e #*0,000! Flexible-,udget 'arian-e #*),000! &. 9rofit-varian-e -om(onents a. total master (stati-) budget varian-e 0 a-tual o(erating in-ome - master budget o(erating in-ome 0 #&0,000 - #%0,000 0 )+-,---U b. total flexible-budget varian-e 0 a-tual o(erating in-ome - flexible-budget o(erating in-ome 0 #&0,000 - #%),000 0 )+4,---U -. total variable -ost flexible-budget varian-e 0 a-tual total variable -osts 7 flexible-budget total variable -osts 0 #&$0,000 - #&)0,000 0 )4-,---U 1. flexible-budget varian-e for variable manufa-turing -osts 0 a-tual variable manufa-turing -osts - flexible budget for variable manufa-turing -osts 0 #&)1,000 - #&00,000 0 )41,---U "ales 'olume 'arian-e #),000F

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-31

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL 13-45 (+ontinued-1) &. flexible-budget varian-e for variable nonmanufa-turing -osts 0 a-tual variable nonmanufa-turing -osts - flexible-budget variable nonmanufa-turing -osts 0 #39,000 - #)0,000 0 )1,---U d. total fixed -ost flexible-budget varian-e 0 a-tual total fixed -osts - flexiblebudget total fixed -osts 0 #90,000 - #$1,000 0 #),000! 1. flexible-budget varian-e for fixed manufa-turing -osts 0 a-tual fixed manufa-turing -osts - flexible-budget for fixed manufa-turing -osts 0 #*0,000 - #*0,000 0 )&. flexible-budget varian-e for fixed nonmanufa-turing -osts 0 a-tual fixed nonmanufa-turing -osts - flexible-budget for fixed nonmanufa-turing -osts 0 #)0,000 - #31,000 0 )4,---U 3. >nter(retation of (rofit varian-es a. total master 0static1 budget variance this is the total o(erating (rofit varian-e for the (eriod, i.e., the differen-e bet<een a-tual o(erating (rofit and o(erating (rofit as stated in the master (stati-) budget. :oti-e that this varian-e is a fun-tion of five fa-tors selling (ri-e (er unit, sales mix, sales volume, variable -ost (er unit, and total fixed -osts. Ge abstra-t in +ha(ter 13 from the multi(rodu-t -ase and deal onlA <ith a single-out(ut -ontext. 6hus, <e should be able to de-om(ose anA (rofit varian-e into varian-es related to the other four fa-tors, as ex(lained belo<. b. total fle2ible*budget variance this varian-e ex(lains the (ortion of the total (rofit varian-e for the (eriod related to a -ombination of three fa-tors selling (ri-e (er unit, variable -ost (er unit, and total fixed -osts. 6hese varian-es, and the total flexible-budget varian-e bA extension, are determined bA holding -onstant sales volume. 6hat is, a-tual o(erating results are -om(ared to budgeted results flexed to the a-tual out(ut level. -. fle2ible*budget variance for total variable cost this varian-e re(resents one -om(onent of the total flexible-budget varian-e. 6hat is, it re(resents the effe-t on o(erating (rofit of the variable -ost (er unit being different from (lanned. 6he varian-e -an be broCen be -al-ulating a flexible-budget varian-e for ea-h variable -ost (e.g., bA fun-tional -ategorA). 1. fle2ible*budget variance for total variable manufacturing costs this varian-e re(resents the (ortion of the flexible-budget varian-e that is attributable to variable manufa-turing -ost (er unit being different from budgeted amount. 3s su-h, it -an be further de-om(osed into a total varian-e for dire-t materials, a total varian-e for dire-t labor, and a total varian-e for variable overhead (-ha(ter 1)).

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-32

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL

13-45 (+ontinued-&) 1. fle2ible*budget variance for total variable manufacturing costs this varian-e re(resents the (ortion of the flexible-budget varian-e that is attributable to variable manufa-turing -ost (er unit being different from budgeted amount. 3s su-h, it -an be further de-om(osed into a total varian-e for dire-t materials, a total varian-e for dire-t labor, and a total varian-e for variable overhead (+ha(ter 1)). &. fle2ible*budget variance for total variable nonmanufacturing costs this varian-e re(resents the (ortion of the flexible-budget varian-e that is attributable to nonmanufa-turing -ost (er unit being different from budgeted amount. 3s su-h, it -an be further de-om(osed into a total varian-e for ea-h nonmanufa-turing -ost element (e.g., selling ex(enses). d. fle2ible*budget variance for total fi2ed costs this varian-e is also referred to as a s(ending varian-e, sin-e it re(resents the differen-e bet<een a-tual fixed -osts and budgeted fixed -osts. 3s su-h, the varian-e -an be further broCen do<n into fun-tional -ategories, as ex(lained belo<. 1. fle2ible*budget variance for total fi2ed manufacturing costs this is the (ortion of the flexible-budget varian-e for total fixed -osts that is attributable to s(ending on fixed manufa-turing -osts being different from budgeted s(ending. 3s su-h, this varian-e -an be further broCen do<n on a line-item basis ((ro(ertA taxes, de(re-iation, su(ervisorA salaries, et-.). &. fle2ible*budget variance for total fi2ed nonmanufacturing costs this is the (ortion of the flexible-budget varian-e for total fixed -osts that is attributable to s(ending on nonmanufa-turing fixed -osts being different from budgeted s(ending. 3s su-h, this varian-e -an be further broCen do<n on a line-item basis (i.e., sales salaries, de(re-iation, et-.).

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-33

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL 13-45 1C9$"i$ue -32 4rtiO B +o. 5aster ("tati-) ,udget 'arian-e (3-tual 4(erating 9rofit - 5aster ,udget 4(erating 9rofit) )+-,---U

F,-'arian-e )+4,---U (#&0,000 - #%),000)

"ales 'olume 'arian-e )4,---F (#)02unit x 100 units)

"9 'arian-e )1-,---U

'ariable +ost 'arian-es )4-,---U

Fixed +ost 'arian-es )4,---U

5anufa-turing )41,---U

5arCeting )1,---F

5anufa-turing )-

5arCeting )4,---U

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

13-3#

The McGraw-Hill Companies, 2

STUDENT SOLUTIONS MANUAL 13-%$ (+ontinued-)) N9"e "9 S"u e$" 3n /x-el file solution -overing (arts (1) and (&) of this assignment is embedded belo<. @ou -an o(en this DobEe-tF bA doing the follo<ing 1. .ight -li-C anA<here in the <orCsheet area belo<. &. "ele-t D<orCsheet obEe-tF and then sele-t D4(en.F 3. 6o return to the Gord do-ument, sele-t DFileF and then D+lose and return to...F <hile Aou are in the s(readsheet mode. 6he s-reen should then return Aou to the Gord do-ument.
13-45: M#("e& Bu !e" #$ P&9Bi" %#&i#$'e A$#l3(i( I$6u" A&e# 5aster ,udget ?ata "ales volume (units) 0 "elling (ri-e (er unit 0 'ariable manufa-turing -osts2unit 0 'ariable selling -ost (% of sales) 0 Fixed manufa-turing -osts 0

3,900 #100.00 #*0.00 0.10 #*0,000

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-3$

The McGraw-Hill Companies,

STUDENT SOLUTIONS MANUAL 13-5- DM #$ DM ?#&i#$'e(, (9l?i$! u$<$9=$( ()0 minutes) ?ire-t 5aterials 38 x "9 38 x 39 38 x #* 0 #131,*00 0K 9ur-hase 9ri-e varian-e #1,*00 ! 38 x "9 38 x #* 0 K "8 x "9 (P),*00 x 1Q x #*) 0 #13*,000 !sage varian-e #*,000 ! ?ire-t Labor 38 x 39 #30) 0K .ate varian-e #),&00 ! 0 K /ffi-ien-A varian-e #1,000 F 0 K 38 x "9 38 x #30 "8 x "9 (P),*00 x &23Q x

1. 6otal standard dire-t labor -ost for the (anels manufa-tured ),*00 units x &23 hour (er unit x #30 (er hour 0 ).-,--&. 6otal dire-t labor hours <orCed, 38 6otal hours <orCed at standard rate 0 #90,000 - #1,000 0 #$),000 0 38 x "9 38 0 #$),000 #302hr. 0 >,5-- /9u&( 3. 3-tual dire-t labor hourlA <age rate, 39 0 a-tual labor -ost labor hours <orCed 0 (#$),000 ; #),&00) &,$00 hours <orCed 0 )310+- 6e& /9u& ). 6otal standard MuantitA of dire-t materials for the (anels manufa-tured ),*00 (anels manufa-tured x 1 lbs.2(anel 0 >4,--- lb(0 *. 6otal (ounds of dire-t materials used, 38 0 total (ounds used, at standard -ost standard -ost (er (ound 0 P(&%,000 lbs. x #*) ; #*,000Q #*2lb. 0 #1)0,000 #*2lb. 0 >5,--- lb(0 1. 6otal (ounds of dire-t materials (ur-hased, 38 0 total (ounds (ur-hased, at std. -ost standard -ost2lb. 0 (#131,*00 - #1,*00) #*2lb. 0 >*,--- lb(0 %. 3-tual dire-t materials (ri-e (er (ound 0 a-tual -ost of (ur-hases number of (ounds (ur-hased 0 #131,*00 &1,000 0 )+0>+@lb0

Blocher, Stout, Cokins, Chen, Cost Management, 4/e

2 !

13-3%

The McGraw-Hill Companies,