EXERCISE 11-19

1.

Variable-overhead spending variance

$20,000 Adverse

2.

Variable-overhead efficiency variance =

$60,000 Adverse

3.

Fixed-overhead budget variance

$3,000 F
Fixed Overhead Volume variance= $20000

11-26
Variable-overhead spending variance
= $140,000 U
Variable-overhead efficiency variance
= $40,000 F
Fixed-overhead budget variance
= $150,000 U
*Budgeted fixed overhead = 300,000 hours $12 per hour
Fixed Overhead Volume variance= $240000
EX 11-29
1. VOH spending variance = 16500 Adverse
2. VOH efficiency variance = 15000 Adverse
3. FOH budget variance = 40000 Favourable

4. Fixed Overhead Volume variance= 100000

EX 11-44
1. Variable-overhead spending variance = $173,000 Unfavorable
2. VOH efficiency variance = 28000 Adverse

3. FOH budget variance = 8000 Favourable

4. Fixed Overhead Volume variance= 25000

EXERCISE 11-21
1.

a. Variable-overhead spending variance

b. Variable-overhead efficiency variance

c. Fixed-overhead budget variance

$40,500 U

$40,500 U

$2,000 U

d. Fixed-overhead volume variance

$12,000

Exercise 11-24

a.

Fixed-overhead budget
variance

= actual fixed overhead budgeted fixed overhead

$15,000 U = X $50,000
X = $65,000 = actual fixed overhead
b.

Total actual overhead = actual variable overhead + actual fixed overhead

$713,000 = X + $65,000
X = $648,000 = actual variable overhead
Variable-overhead spending variance

= actual variable overhead (AH SR)

$72,000 U = $648,000 (AH $8)

$8AH = $576,000
AH = 72,000

Actual variable-overhead
rate per machine hour

c.

Fixed-overhead rate

actual variable overhead

actual hours

$648,000
$9 per hour
72,000

budgeted fixed overhead

budgetedmachine hours

$50,000
(25,000 units)(4 hrs. per unit)

= $.50 per hr.

Total standard = standard variable overhead rate + fixed-overhead rate
overhead rate
$8.50 = $8.00 + $.50
Total applied overhead

= total standard hours total standard overhead rate

$816,000 = X $8.50
X = 96,000 = total standard hrs.

d.

Actual production =

total standard hrs.

standard hrs. per unit

96,000
24,000 units
4

Actual machine hrs. per unit of output

= total actual machine hrs.

actual production

= 72,000 hrs. 3 hrs. per unit

24,000 units

e.

Total budgeted overhead (flexible budget)

= budgeted fixed overhead + (SVR SH)
= $50,000 + ($8.00 24,000 units 4 hrs. per unit)
= $818,000

f.

Total budgeted overhead (static budget)

total standard

overhead rate

budgeted

production

standard hrs.

per unit

= ($8.50)(25,000)(4)
= $850,000
g.

Fixed overhead volume variance

= budgeted fixed overhead applied fixed overhead
= $50,000 ($.50)(24,000 4)
= $2,000 (positive)*
*Consistent with the discussion in the text, we choose not to interpret the volume
variance as either favorable or unfavorable. Some accountants would designate a
positive volume variance as "unfavorable" and a negative volume variance as
"favorable."

CASE 11-48
1.

Planned production = 5,000 units.

(a)

Fixed-overhead
rate per directlabor hour
$4 per hr. =

budgeted fixed overhead

planned direct-labor hours

$40,000
X

Therefore, planned direct-labor hours (X) equals 10,000 hours.

(b)

Planned direct-labor hours = planned production standard hours per unit

10,000 hr. = X 2 hr. per unit

Therefore, planned production (X) equals 5,000 units.
2.

Actual production

= planned production 500 units

= 5,000 units 500 units
= 4,500 units

3.

Actual fixed overhead

Fixed overhead
budget variance

$43,250.

actual fixed overhead budgeted fixed overhead

$3,250 U =

X $40,000

Therefore, actual fixed overhead (X) equals $43,250.

4.

Total standard allowed direct-labor hours

= 4,500 units produced 2 hr. per unit
= 9,000 hr.

5.

Actual direct-labor rate =

$15 per hour.

Direct-labor rate variance = AH(AR SR)

$8,800 U = 8,800(AR $14)
Therefore, AR = $15.
6.

Standard variable-overhead rate

$6 per direct-labor hour.

Variable-overhead efficiency variance = SVR(AH SH)

$1,200 F = SVR(8,800 9,000)

Therefore, SVR = $6 per hr.

7.

Actual variable-overhead
rate

= $6.30 per direct-labor hour.

Variable-overhead = AH(AVR SVR)

spending variance
$2,640 U = 8,800(AVR $6)
Therefore, AVR = $6.30 per hr.

8.

Standard direct-material quantity

per unit

= total standard direct-material quatity allowed

actual productionin units
= 13,500 kg. *
4,500 units
= 3 kg.

*Direct-material quantity variance

= SP(AQ SQ)

$6,000 U = $12(14,000 SQ)

SQ = 13,500 kg.
9.

Direct-material price
variance

= PQ(AP SP)
= 14,000($13.50 $12.00)
= $21,000 U

Applied fixed
overhead

10.

= standard fixed-overhead rate standard allowed hours

= $4 per hr. 9,000 hr.
= $36,000

Fixed-overhead
volume variance

11.

= budgeted fixed overhead applied fixed overhead

= $40,000 $36,000
= $4,000 (Positive)*

*Consistent with the discussion in the text, we choose not to interpret the volume variance
as either favorable or unfavorable. Some managerial accountants would classify this as an
unfavorable variance, because planned production exceeded actual production.
CASE 11-49
1.

New contribution report for April based on a flexible budget:

Flexible Budget*
Actual
Variance
______________________________________
Units (in pounds)..
450,000
450,000
-Revenue...
Direct material
Direct labor.
Variable overhead.
Total variable costs.
Contribution margin..

$3,600,000
652,500
378,000
729,000
$1,759,500
$1,840,500

$3,555,000
865,000
348,000
750,000
$1,963,000
$1,592,000

$ 45,000 U
212,500 U
30,000 F
21,000 U
$203,500 U
$248,500 U

*Each dollar number in the flexible budget column is equal to the static budget number
given in the problem multiplied by 1.125 (450,000/400,000). This reflects the increase in the
volume of sales from 400,000 units to 450,000 units.

2.

The total contribution margin on the flexible budget is $1,840,500. See requirement
(1). Alternatively, multiply the static budget contribution margin of $1,636,000 by
1.125 (450,000/400,000), as explained in requirement (1).

3.

The interpretation of the contribution margin on the flexible budget, $1,840,500, is

as follows: If the unit sales price and unit variable costs had all remained at their
budgeted levels, and sales volume increased from 400,000 units to 450,000 units,
the contribution margin would have been $1,840,500.

4.

The variance between the flexible budget contribution margin and the actual
contribution margin, from requirement (1) is $248,500 U.
This $248,500 unfavorable variance between the flexible budget and actual
contribution margin for the chocolate nut supreme cookie product line during April
is explained by the following variances:
a.

Direct-material price variance:

Type of Material
PQ*(AP+ SP)
Cookie mix........................... 4,650,000($.02$.02).............
Milk chocolate..................... 2,660,000($.20$.15).............
Almonds............................... 480,000($.50$.50)................
Total...........................................................................................

Variance
$
0
133,000 U
0
$133,000 U

*PQ = AQ, because all materials were used during the month of purchase.
+
AP = actual total cost (given) actual quantity
b

Direct-material quantity variance:

Type of Material
SP(AQ SQ*)
Cookie mix........................... $.02(4,650,0004,500,000)....
Milk chocolate..................... $.15(2,660,0002,250,000)....
Almonds............................... $.50(480,000450,000)..........
Total...........................................................................................

Variance
$ 3,000 U
61,500 U
15,000 U
$79,500 U

*SQ = standard ounces of input per pound of cookies actual pounds of

cookies produced.
c

Direct-labor rate variance = AH(AR SR) = 0.

Dividing the total actual labor cost by the actual labor time used, for each
type of labor, shows that the actual rate and the standard rate are the same
(i.e., AR = SR). Thus, this variance is zero.
d

Direct-labor efficiency variance:

Type of Labor
SR*(AH SH+)
Mixing..................................
$.24(450,000450,000)..........
Baking.................................. $.30(800,000900,000)..........
Total...........................................................................................

Variance
$
0
30,000 F
$30,000 F

*Standard rate per minute = standard rate per hour 60 minutes

+

Standard minutes per unit (pound) actual units (pounds) produced

Variable-overhead spending variance

= actual variable overhead (AH SVR)
= $750,000 [(1,250,000*/60) $32.40]
= $75,000 U
*Total actual minutes of direct labor.

Variable-overhead efficiency variance

= SVR(AH SH*)

= $32.40

1, 250,000 3 450,000

60
60

= $54,000 F
*SH = (3 minutes per unit, or pound 450,000 units, or pounds) 60 minutes

g.

Sales-price variance =

salesactualprice

= ($7.90* $8.00) 450,000

= $45,000 U

budgeted
actual
sales price
sales volume

*Actual sales price = $3,555,000 450,000 units sold

Summary of variances:
Direct-material price variance.........................................................
Direct-material quantity variance....................................................
Direct-labor rate variance................................................................
Direct-labor efficiency variance......................................................
Variable-overhead spending variance............................................
Variable-overhead efficiency variance...........................................
Sales-price variance........................................................................
Total...................................................................................................

$133,000 U
79,500 U
0
30,000 F
75,000 U
54,000 F
45,000 U
$248,500 U