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

	Fixed Budget
Sales (14,000 units × $210 per unit)						$	2,940,000
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							1,488,000
Selling expenses
Sales commissions			98,000
Packaging			210,000
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						$	476,000

(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 12,000 units.
(4) Compute the income from operations for sales volume of 16,000 units.
Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted total expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

	Fixed Budget			Actual Results			Variances
Sales (in units)		8,000			6,900
Sales (in dollars)	$	640,000		$	614,100		$	25,900	U
Total expenses		587,000			557,000			30,000	F
Income from operations	$	53,000		$	57,100		$	4,100	U

Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately. (Indicate the effect of each variance by selecting  for favorable, unfavorable, and no variance. Do not round your intermediate calculations. Round your final answers to whole dollars.)
A manufactured product has the following information for June.

	Standard	Actual
Direct materials	5 lbs. @ $9 per lb.		42,000	lbs. @ $9.10 per lb.
Direct labor	3 hrs. @ $15 per hr.		24,600	hrs. @ $15.40 per hr.
Overhead	3 hrs. @ $13 per hr.	$	329,400
Units manufactured			8,300

(1) Compute the standard cost per unit.
(2) Compute the total cost variance for June.
Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

Direct materials (15 lbs. @ $4 per lb.)			$60
Direct labor (4 hrs. @ $15 per hr.)			60

During June the company incurred the following actual costs to produce 8,700 units.

Direct materials (132,700 lbs. @ $3.75 per lb.)		$	497,625
Direct labor (39,000 hrs. @ $15.15 per hr.).			590,850

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
(1) Compute the direct materials price and quantity variances.
(Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
 



(2) Compute the direct labor rate variance and the direct labor efficiency variance.
(Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
Hart Company made 3,380 bookshelves using 22,380 board feet of wood costing $313,320. The company’s direct materials
standards for one bookshelf are 8 board feet of wood at $13.90 per board foot.
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
(1) Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.
(2) Hart applies management by exception by investigating direct materials variances of more than 5% of actual direct materials costs.
Which direct materials variances will Hart investigate further?
Hart Company made 3,380 bookshelves using 22,380 board feet of wood costing $313,320. The company’s direct materials standards for one bookshelf are 8 board feet of wood at $13.90 per board foot.
Hart Company uses a standard costing system.
(1) Prepare the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances.
(2) Assume that Hart’s materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.
Javonte Co. set standards of 3 hours of direct labor per unit of product and $15.20 per hour for the labor rate. During October, the company uses 17,000 hours of direct labor at a $261,800 total cost to produce 5,800 units of product. In November, the company uses 21,000 hours of direct labor at a $324,450 total cost to produce 6,200 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.
(2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
Sedona Company set the following standard costs for one unit of its product for this year.

Direct material (30 Ibs. @ $2.30 per Ib.)		$	69.00
Direct labor (20 hrs. @ $4.30 per hr.)			86.00
Variable overhead (20 hrs. @ $2.30 per hr.)			46.00
Fixed overhead (20 hrs. @ $1.20 per hr.)			24.00
Total standard cost		$	225.00

The $3.50 ($2.30 + $1.20) total overhead rate per direct labor hour is based on an expected operating level equal to 60%
of the factory’s capacity of 69,000 units per month. The following monthly flexible budget information is also available.

		Operating Levels (% of capacity)
Flexible Budget			55%				60%				65%
Budgeted output (units)			37,950				41,400				44,850
Budgeted labor (standard hours)			759,000				828,000				897,000
Budgeted overhead (dollars)
Variable overhead		$	1,745,700			$	1,904,400			$	2,063,100
Fixed overhead			993,600				993,600				993,600
Total overhead		$	2,739,300			$	2,898,000			$	3,056,700

During the current month, the company operated at 55% of capacity, employees worked 731,000 hours, and the following
actual overhead costs were incurred.

Variable overhead costs		$	1,710,000
Fixed overhead costs			1,031,500
Total overhead costs		$	2,741,500

Sedona Company set the following standard costs for one unit of its product for this year.

Direct material (30 Ibs. @ $2.30 per Ib.)		$	69.00
Direct labor (20 hrs. @ $4.30 per hr.)			86.00
Variable overhead (20 hrs. @ $2.30 per hr.)			46.00
Fixed overhead (20 hrs. @ $1.20 per hr.)			24.00
Total standard cost		$	225.00

The $3.50 ($2.30 + $1.20) total overhead rate per direct labor hour is based on an expected operating level equal to
60% of the factory’s capacity of 69,000 units per month. The following monthly flexible budget information is also available.

		Operating Levels (% of capacity)
Flexible Budget			55%				60%				65%
Budgeted output (units)			37,950				41,400				44,850
Budgeted labor (standard hours)			759,000				828,000				897,000
Budgeted overhead (dollars)
Variable overhead		$	1,745,700			$	1,904,400			$	2,063,100
Fixed overhead			993,600				993,600				993,600
Total overhead		$	2,739,300			$	2,898,000			$	3,056,700

During the current month, the company operated at 55% of capacity, employees worked 731,000 hours,
and the following actual overhead costs were incurred.

Variable overhead costs		$	1,710,000
Fixed overhead costs			1,031,500
Total overhead costs		$	2,741,500

AH = Actual Hours
SH = Standard Hours
AVR = Actual Variable Rate
SVR = Standard Variable Rate
1. Compute the variable overhead spending and efficiency variances.
2. Compute the fixed overhead spending and volume variances and classify each as favorable or unfavorable.

3. Compute the controllable variance.

Q10. World Company expects to operate at 70% of its productive capacity of 38,000 units per month. At this planned level, the
company expects to use 16,625 standard hours of direct labor. Overhead is allocated to products using a predetermined standard
rate of 0.625 direct labor hour per unit. At the 70% capacity level, the total budgeted cost includes $66,500 fixed overhead cost and
$182,875 variable overhead cost. In the current month, the company incurred $421,625 actual overhead and 16,405 actual labor
hours while producing 44,600 units. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.
Do not round intermediate calculations. Round “OH costs per DL hour” to 2 decimal places.)

World Company expects to operate at 80% of its productive capacity of 56,250 units per month. At this planned level, the company expects to use 27,900 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.620 direct labor hour per unit. At the 80% capacity level, the total budgeted cost includes $69,750 fixed overhead cost and $320,850 variable overhead cost. In the current month, the company incurred $361,000 actual overhead and 24,900 actual labor hours while producing 40,000 units.
(1) Compute the overhead volume variance. Classify each as favorable or unfavorable.
(2) Compute the overhead controllable variance. Classify each as favorable or unfavorable.

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of
10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget:

	Operating Levels
Overhead Budget	80%
Production in units		10,000
Standard direct labor hours		28,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	15,400
Indirect labor		28,000
Power		7,000
Maintenance		5,600
Total variable costs		56,000
Fixed overhead costs
Rent of factory building		24,000
Depreciation—Machinery		10,900
Supervisory salaries		15,500
Total fixed costs		50,400
Total overhead costs	$	106,400

During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs:

Overhead costs (actual)
Indirect materials	$	15,400
Indirect labor		30,950
Power		7,875
Maintenance		6,940
Rent of factory building		24,000
Depreciation—Machinery		10,900
Supervisory salaries		19,000
Total actual overhead costs	$	115,065

1. Compute the overhead controllable variance and classify it as favorable or unfavorable.
 



2. Compute the overhead volume variance and classify it as favorable or unfavorable.

3. Prepare an overhead variance report at the actual activity level of 11,250 units.
Comp Wiz sells computers. During May, it sold 600 computers at a $1,100 average price each.
The May fixed budget included sales of 650 computers at an average price of $1,060 each.


AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
 
1&2. Compute the sales price variance and the sales volume variance for May. 
Classify it as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
Antuan Company set the following standard costs for one unit of its product.

Direct materials (4.0 Ibs. @ $4.00 per Ib.)	$	16.00
Direct labor (1.6 hrs. @ $11.00 per hr.)		17.60
Overhead (1.6 hrs. @ $18.50 per hr.)		29.60
Total standard cost	$	63.20

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		24,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		197,000
Total fixed overhead costs					309,000
Total overhead costs				$	444,000

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

Direct materials (61,000 Ibs. @ $4.10 per lb.)				$	250,100
Direct labor (20,000 hrs. @ $11.20 per hr.)					224,000
Overhead costs
Indirect materials	$	41,600
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		197,000			601,950
Total costs				$	1,076,050

Required:
1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%,
and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.
 
Antuan Company set the following standard costs for one unit of its product.
 

Direct materials (4.0 Ibs. @ $4.00 per Ib.)		$	16.00
Direct labor (1.6 hrs. @ $11.00 per hr.)			17.60
Overhead (1.6 hrs. @ $18.50 per hr.)			29.60
Total standard cost		$	63.20

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		24,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		197,000
Total fixed overhead costs					309,000
Total overhead costs				$	444,000

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

Direct materials (61,000 Ibs. @ $4.10 per lb.)				$	250,100
Direct labor (20,000 hrs. @ $11.20 per hr.)					224,000
Overhead costs
Indirect materials	$	41,600
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		197,000			601,950
Total costs				$	1,076,050

3. Compute the direct materials cost variance, including its price and quantity variances. (Indicate the effect of each
variance by selecting  for favorable, unfavorable, and No variance.)
Antuan Company set the following standard costs for one unit of its product.

Direct materials (4.0 Ibs. @ $4.00 per Ib.)	$	16.00
Direct labor (1.6 hrs. @ $11.00 per hr.)		17.60
Overhead (1.6 hrs. @ $18.50 per hr.)		29.60
Total standard cost	$	63.20

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		24,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		197,000
Total fixed overhead costs					309,000
Total overhead costs				$	444,000

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

Direct materials (61,000 Ibs. @ $4.10 per lb.)				$	250,100
Direct labor (20,000 hrs. @ $11.20 per hr.)					224,000
Overhead costs
Indirect materials	$	41,600
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		197,000			601,950
Total costs				$	1,076,050

4. Compute the direct labor cost variance, including its rate and efficiency variances. (Indicate the effect of each variance by selecting  for favorable, unfavorable, and No variance. Round “Rate per hour” answers to two decimal places.)

 
Antuan Company set the following standard costs for one unit of its product.
 

Direct materials (4.0 Ibs. @ $4.00 per Ib.)	$	16.00
Direct labor (1.6 hrs. @ $11.00 per hr.)		17.60
Overhead (1.6 hrs. @ $18.50 per hr.)		29.60
Total standard cost	$	63.20

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		24,000
Depreciation—Machinery		71,000
Taxes and insurance		17,000
Supervision		197,000
Total fixed overhead costs					309,000
Total overhead costs				$	444,000

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

Direct materials (61,000 Ibs. @ $4.10 per lb.)				$	250,100
Direct labor (20,000 hrs. @ $11.20 per hr.)					224,000
Overhead costs
Indirect materials	$	41,600
Indirect labor		176,450
Power		17,250
Repairs and maintenance		34,500
Depreciation—Building		24,000
Depreciation—Machinery		95,850
Taxes and insurance		15,300
Supervision		197,000			601,950
Total costs				$	1,076,050

 
Spot Company's master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of March.
Each unit requires 1/2 hour of direct labor. The direct labor rate is $15.00 per hour. Calculate the expected total direct labor cost for t
he month of March:
 
$82,000

11,000 x 1/2 x 15 = 82,500
   
Carter Production Inc required production for the first six month of the year is as follows

Jan       50,000
Feb      70,000
Mar     85,000
Apr      105,000
May     110,000
Jun       120,000

Each unit requires two pounds of material. Given a desired ending inventory of 20% of the next month's
production needs, the pounds of material to be purchased in April is:
 
212,000 pounds

(105,000 x 2) + (110,000 x 2 x .20) 44,000 - (.20% x 105,000) = 212,000
   
A company's flexible budget for 15,000 units of production showed sales, $90,000; variable costs,
$37,500; and fixed costs, $25,000. The sales expected if the company produces and sells 19,000 units is:
 
$114,000
 
90,000 / 15,000 units = 6.00
6.00 × 19,000 units = 114,000
 

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