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World Company expects to operate at 80% of its productive capacity of 70,000 units per month. At this planned level,
the company expects to use 25,200 standard hours of direct labor. Overhead is allocated to products using a predetermined
standard rate of 0.450 direct labor hours per unit. At the 80% capacity level, the total budgeted cost includes $57,960 fixed
overhead cost and $322,560 variable overhead cost. In the current month, the company incurred $386,000 actual overhead
and 22,200 actual labor hours while producing 53,000 units.
 
(1) Compute the overhead volume variance.
(2) Compute the overhead controllable variance.
 
REQ 1
Compute the overhead volume variance. Classify as favorable or unfavorable. (Round "OH costs per DL hour" to 2 decimal places.)

REQ 2
Compute the overhead controllable variance. Classify as favorable or unfavorable.

   
After evaluating Null Company’s manufacturing process, management decides to establish standards of 2 hours of direct labor per
unit of product and $16.90 per hour for the labor rate. During October, the company uses 14,600 hours of direct labor at a $249,660
total cost to produce 7,500 units of product. In November, the company uses 23,900 hours of direct labor at a $411,080 total cost to
produce 7,900 units of product.
 
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
 
(1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months.
Classify each variance as favorable or unfavorable.
                                                                                                                                                SR                             SH                             SR

 
*Note Typo
Incorrect answers should be (form left to right):               SR           SH          SR
 
 
Antuan Company set the following standard costs for one unit of its product.
 

Direct materials (4.0 Ibs. @ $5.00 per Ib.)	$	20.00
Direct labor (1.8 hrs. @ $11.00 per hr.)		19.80
Overhead (1.8 hrs. @ $18.50 per hr.)		33.30
Total standard cost	$	73.10

The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity
of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level.
 

Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials	$	15,000
Indirect labor		75,000
Power		15,000
Repairs and maintenance		30,000
Total variable overhead costs				$	135,000
Fixed overhead costs
Depreciation—Building		23,000
Depreciation—Machinery		71,000
Taxes and insurance		18,000
Supervision		252,500
Total fixed overhead costs					364,500
Total overhead costs				$	499,500

The company incurred the following actual costs when it operated at 75% of capacity in October.
 

Direct materials (60,500 Ibs. @ $5.20 per lb.)				$	314,600
Direct labor (21,000 hrs. @ $11.20 per hr.)					235,200
Overhead costs
Indirect materials	$	41,700
Indirect labor		176,250
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		23,000
Depreciation—Machinery		95,850
Taxes and insurance		16,200
Supervision		252,500			657,250
Total costs				$	1,207,050

_QC_CS-122864
Prepare a detailed overhead variance report that shows the variances for individual items of overhead.
 

   
Tempo Company’s fixed budget (based on sales of 14,000 units) for the first quarter of calendar year 2017 reveals the following.
 

	Fixed Budget
Sales (14,000 units)		$3,024,000
Cost of goods sold
Direct materials	$336,000
Direct labor	602,000
Production supplies	378,000
Plant manager salary	136,000	1,452,000
Gross profit		1,572,000
Selling expenses
Sales commissions	112,000
Packaging	196,000
Advertising	100,000	408,000
Administrative expenses
Administrative salaries	186,000
Depreciation—office equip.	156,000
Insurance	126,000
Office rent	136,000	604,000
Income from operations		$560,000

 
Complete the following flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units.
(Round cost per unit to 2 decimal places.)
Solitaire Company’s fixed budget performance report for June follows. The $333,750 budgeted expenses include $284,800 variable
expenses and $48,950 fixed expenses. Actual expenses include $54,950 fixed expenses.
 

	Fixed Budget			Actual Results			Variances
Sales (in units)		8,900			11,300
Sales (in dollars)	$	445,000		$	565,000		$	120,000	F
Total expenses		333,750			395,500			61,750	U
Income from operations	$	111,250		$	169,500		$	58,250	F

Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately.
 

 
Hart Company made 3,600 bookshelves using 32,000 board feet of wood costing $332,800.
The company’s direct materials standards for one bookshelf are 10 board feet of wood at $10.30 per board foot.
(1) Compute the direct materials price and quantity variances incurred in manufacturing these bookshelves.
 
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
 

The following information describes production activities of Mercer Manufacturing for the year.

Actual direct materials used	36,000 lbs. at $6.05 per lb.
Actual direct labor used	11,100 hours for a total of $233,100
Actual units produced	66,030

Budgeted standards for each unit produced are 0.50 pounds of direct material at $6.00 per pound and
10 minutes of direct labor at $22.00 per hour.
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
(1) Compute the direct materials price and quantity variances.

(2) Compute the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
 
Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units.
The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.
What is the direct materials quantity variance?
 
$400 unfavorable
$450 unfavorable
$2,500 unfavorable
$2,550 unfavorable
$2,950 unfavorable  
Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

Direct labor standard (4 hrs. @ $7/hr.)	$28 per unit
Actual hours worked	12,250
Actual rate per hour	$7.50

 
$6,125 unfavorable
$7,000 unfavorable
$7,000 favorable
$12,250 favorable
$6,125 favorable  
The following information relating to a company’s overhead costs is available.

Actual total variable overhead	$73,000
Actual total fixed overhead	$17,000
Budgeted variable overhead rate per machine hour	$2.50
Budgeted total fixed overhead	$15,000
Budgeted machine hours allowed for actual output	30,000

Based on this information, the total variable overhead variance is:
 
$2,000 favorable
$6,000 favorable
$2,000 unfavorable
$6,000 unfavorable
$1,000 favorable  
Overhead cost variance is:
 
The difference between the overhead costs actually incurred and the overhead budgeted at the actual operating level.
The difference between the actual overhead incurred during a period and the standard overhead applied
The difference between actual and budgeted cost caused by the difference between the actual price per unit and the budgeted price per unit.
The costs that should be incurred under normal conditions to produce a specific product (or component) or to perform a specific service.
The difference between the total overhead cost that would have been expected if overhead cost was allocated to products using the standard rate.  
A flexible budget performance report compares the differences between:
 
Actual performance and budgeted performance based on actual sales volume
Actual performance over several periods.
Budgeted performance over several periods.
Actual performance and budgeted performance based on budgeted sales volume.
Actual performance and standard costs at the budgeted sales volume.  
Fletcher Company collected the following data regarding production of one of its products.
Compute the standard quantity allowed for the actual output.
 

Direct materials standard (6 lbs. @ $2/lb.)	$12 per finished unit
Actual direct materials used	243,000 lbs.
Actual finished units produced	40,000 units
Actual cost of direct materials used	$483,570

 
243,000 pounds.
240,000 pounds
40,000 pounds
480,000 pounds.
80,000 pounds.  
Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers for total sales of $540,000.
The budget for the month was to sell 175 copiers at an average price of
 
$3,200. The sales price variance for the month was:
$20,000 unfavorable
$20,000 favorable
$36,000 unfavorable
$32,000 unfavorable
$36,000 favorable  
A company provided the following direct materials cost information. Compute the total direct materials cost variance.
 

Standard costs assigned:
Direct materials standard cost (405,000 units @ $2.00/unit)	$810,000
Actual costs:
Direct Materials costs incurred (403,750 units @ $2.20/unit)	$888,250

 
$2,500 Favorable
$78,250 Favorable
$78,250 Unfavorable
$80,750 Favorable
$80,750 Unfavorable  
Claremont Company specializes in selling refurbished copiers. During the month, the company sold 180 copiers at an average price
of $3,000 each. The budget for the month was to sell 175 copiers at an average price of $3,200.
The expected total sales for 180 copiers were:
 
$540,000
$576,000
$525,000
$560,000
$550,000  
When recording the journal entry for labor, the Work in Process Inventory account is
 
Debited for standard labor cost
Debited for actual labor cost.
Credited for standard labor cost.
Credited for actual labor cost.
Not used.
   
A company provided the following direct materials cost information. Compute the cost variance.
 
Standard costs assigned:
Direct materials standard cost (405,000 units @ $2/unit               $810,000
Actual costs
Direct Materials costs incurred (403,750 units @ $2.20 /unit)     $888,250
 
$78,250 Unfavorable
 
Actual cost $888,250 - Standard cost $810,000 = $78,25
   
A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs,  $16,000.
The operating income expected if the company produces and sells 16,000 units is:
 
$24,000
 
Selling price per unit = 48,000 / 12,000 units = 4.00 per unit
Variable costs per unit = 18,000 / 12,000 = 1.50 per unit
Contribution margin per unit = 4.00 - 1.50 = 2.50 per unit
Expected operating income for 16,000 units:
Contribution margin: 16,000 x 2.50 = 40,000 – 16,000 = 24,000
   
Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs.
The flexible budget amounts of fixed and variable costs for 10,000 units are:

$150,000 fixed and $102,500 variable
 
Fixed costs remain at     $150,000
Variable costs = (123,000 / 12,000) x 10,000 units = 102,500
   
Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the
fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?
 
$20,000
 
10 x 12,500 – (6 x 12,500) – (3 x 10,000) = 20,000
   
A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000.
Calculate the expected level of operating income if the company produces and sells 13,000 units.
 
$133,000
 
200,000 / 10,000 =          20
40,000 / 10,000 =             4
20 – 4 =                                16
13,000 x 16 =                     208,000
208,000 – 75,000 =          133,000
 
Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of
$26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information,
the budgeted amounts of fixed and variable costs for 15,000 units would be:
 
$10,000 of fixed costs and $90,000 of variable costs.
 
fixed costs remain fixed at                                                          10,000
Variable costs = (72,000 / 12,000 units) x 15,000 =           90,000
   
Kyle, Inc. has collected the following data on one of its products.
 
Direct materials standard (4 lbs. @ $1/lb.)                           $4 per finished unit
Total direct materials cost variance—unfavorable           $13,750
Actual direct materials used                                                       150.000 lbs.
Actual finished units produced                                                  30,000 units
 
The actual cost of the direct materials used is:
 
$133,750
 
(30,000 x 4) + 13,750 = 133,750
   
Kyle, Inc. has collected the following data on one of its products.
 
Direct materials standard (4 lbs. @ $1/lb.)                           $4 per finished unit
Total direct materials cost variance—unfavorable           $13,750
Actual direct materials used                                                       150.000 lbs.
Actual finished units produced                                                  30,000 units
 
The direct materials quantity variance is:
 
$30,000 unfavorable
 
(150,000 x 1) – (30,000 x 4 x 1) = 30,000
   
Kyle, Inc. has collected the following data on one of its products.

Direct materials standard (4 lbs. @ $1/lb.)                           $4 per finished unit
Total direct materials cost variance—unfavorable           $13,750
Actual direct materials used                                                       150.000 lbs.
Actual finished units produced                                                  30,000 units
 
The direct materials price variance is:

$16,250 favorable

30,000 x 4 = 120,000
120,000 + 13,750 = 133,750
150,000 – 133,750 = 16,250
   
Bartels Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels' standard labor cost is $12 per hour.
During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376.
What is Bartels' labor rate variance for August?
 
$2,104 favorable

21,0540 x 12 - 250,376 = 2,104
 

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