ACG 2071 Lecture Notes - Lecture 21: Overnight Delivery, Total Absorption Costing

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chocolateleopard236

26 Nov 2018

School

University of Florida

Department

Accounting

Course

ACG 2071

Professor

Schadewald

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Document Summary

Using flexible budgets in variance analysis: flexible budget, use to divide master budget variance into 2 components, volume variance, caused by unexpectedly low or high sales volume, flexible budget variance, caused by other factors. = budget variance: potential causes, not changes in production volume (costs are fixed, spent more or less on fixed moh costs than expected, rent, supervisory salaries, insurance, property taxes, etc. = volume variance: *budgeted units to produce (standard hours per unit standard rate, **actual units produced (standard hours per unit standard rate) Causes of dm variances: price variance, discounts: volume, cash, early-order, surcharges: rush order, overnight delivery, quality of materials: lower or higher grade, quantity variance. Inexperienced or poorly trained workers: faulty or improperly adjusted machinery, excess breakage due to low-quality materials. Causes of dl variances: rate variance, temporary use of lower or higher paid employees, excessive overtime due to poor scheduling, efficiency variance, low employee morale or fatigue.

Related Questions

The following data were drawn from the records of StuartCorporation.


Planned volume for year (staticbudget)		4,100	units
Standard direct materials costper unit		3.00	pounds	@	$	1.60	per pound
Standard direct labor cost perunit		2.80	hours	@	$	4.50	per hour
Total expected fixed overheadcosts	$	15,580
Actual volume for the year(flexible budget)		4,300	units
Actual direct materials cost perunit		2.70	pounds	@	$	2.00	per pound
Actual direct labor cost perunit		3.20	hours	@	$	4.20	per hour
Total actual fixed overheadcosts	$	11,880

Required

Prepare a materials variance information table showing thestandard price, the actual price, the standard quantity, and theactual quantity.

Calculate the materials price and usage variances. Indicatewhether the variances are favorable (F) or unfavorable (U).

Prepare a labor variance information table showing the standardprice, the actual price, the standard hours, and the actualhours.

Calculate the labor price and usage variances. Indicate whetherthe variances are favorable (F) or unfavorable (U).

Calculate the predetermined overhead rate, assuming that Stuartuses the number of units as the allocation base.

Calculate the fixed cost spending variance. Indicate whether thevariance is favorable (F) or unfavorable (U).

Calculate the fixed cost volume variance. Indicate whether thevariance is favorable (F) or unfavorable (U).

Prepare a materials variance information table showing thestandard price, the actual price, the standard quantity, and theactual quantity. (Round "Standard price" and "Actual price" to 2decimal places.)

Materials Variance Information Table
Standardprice		perpound
Actualprice		perpound
Standardquantity for flexible budget		pounds
Actualquantity used		pounds

Calculate the materials price and usage variances. Indicatewhether the variances are favorable (F) or unfavorable (U). (Select"None" if there is no effect (i.e., zero variance).)


Materialprice variance
Materialusage variance

Prepare a labor variance information table showing the standardprice, the actual price, the standard hours, and the actual hours.(Round "Standard price" and "Actual price" to 2 decimalplaces.)

Labor Variance Information Table
Standardprice		perhour
Actualprice		perhour
Standardhours for flexible budget
Actualhours used

Calculate the labor price and usage variances. Indicate whetherthe variances are favorable (F) or unfavorable (U). (Select "None"if there is no effect (i.e., zero variance).)


Laborprice variance
Laborusage variance

Calculate the predetermined overhead rate, assuming that Stuartuses the number of units as the allocation base. Calculate thefixed cost spending variance and the fixed cost volume variance.Indicate whether the variance is favorable (F) or unfavorable (U).(Round "Predetermined overhead rate" answer to 2 decimal places.Select "None" if there is no effect (i.e., zero variance).)

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e.	Predetermined overhead rate	perunit
f.	Fixedcost spending variance
g.	Fixedcost volume variance

The? Sudbury, South? Carolina, plant of Shannon Sports Companyhas the following standards for its soccer ball? production:

Standards:	0.1 yard
Material (leather) per soccer ball	$21
Material price per yard	0.40 Hour
Direct labor hours per soccer ball	$11 per hour
Wage rate per direct labor hour	$12 per direct labor hour
Variable support cost rate
Actual results for October:
Used 13500 yards of raw material, purchased for $280,530.00. Paid for 8,200 direct labor hours at $11.30 per hour. Incurred $82,000 of variable support costs Manufactured 25,000 soccer balls

Requirements

Determine the following variances for? October:

?(a)	Total direct material cost variance and indicate whether thevariance is favorable or unfavorable
?(b)	Total direct labor cost variance
?(c)	Total variable support cost variance
?(d)	Direct material price variance
?(e)	Direct material quantity variance
?(f)	Direct labor rate variance
?(g)	Direct labor efficiency variance
?(h)	Variable support rate variance
?(i)	Variable support efficiency variance

AH? = Actual number of direct labor hours

AP? = Actual price per unit of materials

AQ? = Actual quantity of materials used

AR? = Actual wage rate

SH? = Number of direct labor hours allowed given the level ofoutput achieved

SP? = Estimated or standard price per unit of materials

SQ? = Standard quantity of materials allowed for the productionlevel achieved

SR? = Standard wage rate

blackcricket13

I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

Standard Amount per Case
	Dark Chocolate	Light Chocolate	Standard Price per Pound
Cocoa	9 lbs.	6 lbs.	$4.40
Sugar	7 lbs.	11 lbs.	0.60
Standard labor time	0.3 hr.	0.4 hr.

	Dark Chocolate	Light Chocolate
Planned production	5,400 cases	12,500 cases
Standard labor rate	$14.50 per hr.	$14.50 per hr.

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

	Dark Chocolate	Light Chocolate
Actual production (cases)	5,100	13,000
	Actual Price per Pound	Actual Pounds Purchased and Used
Cocoa	$4.50	124,500
Sugar	0.55	174,200
	Actual Labor Rate	Actual Labor Hours Used
Dark chocolate	$14.10 per hr.	1,390
Light chocolate	14.90 per hr.	5,330

Required:

1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:

a. Direct materials price variance, direct materials quantity variance, and total variance.

b. Direct labor rate variance, direct labor time variance, and total variance.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero.

a.	Direct materials price variance	$
	Direct materials quantity variance	$
	Total direct materials cost variance	$

b.	Direct labor rate variance	$
	Direct labor time variance	$
	Total direct labor cost variance	$

2. The variance analyses should be based on the amounts at volumes. The budget must flex with the volume changes. If the volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the production. In this way, spending from volume changes can be separated from efficiency and price variances.

salmonskunk938

ACG 2071 Lecture Notes - Lecture 21: Overnight Delivery, Total Absorption Costing

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