Chrome File Edit View History Bookmarks People Window Help 9 e, 85%, Mon May 16

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Chrome File Edit View History Bookmarks People Window Help 9 e, 85%, Mon May 16 9:28:28 PM Benjamin McElwain a E WileyPLUS Dedugen.w.leyplus.com/edugen/lti/main.uni Return to Blackboard Managerial Accounting 2e, WileyPLUS Custom Course for University of California Riverside Help I System Announcements PRINTER VERSION BACK Lexi Belcher picked up the monthly report that Irvin Santamaria left on her desk. She smiled as her eyes went straight to the bottom line of the report and saw the favorable variance for operating income, confirming her decision to push the workers to get those last 270 cases off the production line before the end of the month ASSIGNMENT RESOURCES W6 em But as she glanced over the rest of numbers, Lexi couldn't help but wonder if there were errors in some of the line items. She was puzzled how most of the operating expenses could be higher than the budget since she had worked hard to manage the production line to improve efficiency and reduce costs. Yet the report, shown below, showed a different story Level Submission Problem 6-30 (Part Level Submission) Actual Budget 9,980 $1,866,300 548,900 259,480 279,440 89,820 39,920 648,740 109,780 69,860 129,740 $339,360 Variance Review Scor Review Results by Stud Cases produced and sold Sales revenue Direct material Direct labor Variable manufacturing overhead Variable selling expenses Variable administrative expenses Contribution margin Fixed manufacturing overhead Fixed selling expenses Fixed administrative expenses Operating income 10,250 $1,943,600 559,878 267,115 284,442 92,944 41,657 697,564 110,778 69,361 129,540 $387,88.5 270 Favorable $77,300 Favorable 10,978 Unfavorable 7,635 Unfavorable 5,002 Unfavorable 3,124 Unfavorable 1,737 Unfavorable 48,824 Favorable 998 Unfavorable 499 Favorable 200 Favorable $48,525 Favorable Lexi picked up the phone and called Irvin. "Irvin, I don't get it. We beat the budgeted operating income for the month, but look at all the unfavorable variances on the operating costs. Can you help me understand what's going on?" "Let me look into it and I'll get back to you," Irvin replied Irvin gathered the following additional information about the month's performance Direct materials purchased: 101,796 pounds at a total of $559,878 . Direct materials used: 101,796 pounds Direct labor hours worked: 26,447 at a total cost of $267,115 · Machine hours used: 40,868 16

Explanation / Answer

Answer:

a) Direct material Price variance = AQ ( SP - AP)

= 101796 pounds ( $5.5 - $5.5)

= 101796 pounds *$ 0

= $0 Not applicable

Calculating AP:

AP = Actual direct material cost/ Actual direct material used

= $559878/101796 pounds

= $5.5 per pound

b) Direct Material quantity varinace = SP ( SQ - AQ)

= $5.5 per pound (102500 - 101796)

= $5.5 per pound * 704 pounds

= $3872 F

Calculating SQ:

Standard quantity = Actual units produced * Standard Quantity per unit

= 10250 units * 10 pounds per unit

= 102500

c) Direct labor rate variance = AH ( SR - AR)

= 26447 hours ($10 - $10.10)

= 26447 hours * $ 0.10

= $2645 U

Calculating AR:

AR = Actual direct labor cost/ Actual direct labor hours

= $267115/ 26447 hours

= $10.10 per DLH

d) Direct labor quantity variance = SR ( SH - AH)

= $10 per DLH ( 26547.5 - 26447)

= $10 per DLH * 100.5 Hours

= $1005 F

Calculating SH:

SH = Actual units produced * Standard hours per unit

= 10250 units * 2.59 DLH

= 26547.5 hours

e) Variable overhead spending variance = AH ( SVR - AVR)

= 40868 MH ( $7 - $6.96)

= 40868 MH * $0.04

= $1635 F

Calculating AVR:

AVR = Actual variable overhead cost/ Actual Machine hours used

= $284442/ 40868 hours

= $6.96 per MH

f) Variable overhead efficiency varinace = SVR ( SH - AH)

= $7 (41000 - 40868)

= $7 per MH * 132 hours

= $924 F

Calculating SH:

SH = Actual units produced * Standard MH per unit

= 10250 units * 4MH per unit

= 41000 hours

g) Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead

= $109780 - $110778

= $998 U

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