Reference no: EM132316116
Exercise 8-21 Variable manufacturing overhead, variance analysis.
Esquire Clothing is a manufacturer of d esigner suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manu- facturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit.
| Actual Costs Incurred |
Actual Input Quantity * |
Flexible Budget: Budget |
Budgeted Input Qty allowed |
| (Act Input Qt*actual rate) |
Budgeted Rate |
input qt allowed*bud rate) |
for act output*bud rate) |
| (4,536*$11.50) |
(4,536*$12) |
(4*1,080*$12) |
(4*1,080*$12) |
| $52,164.00 |
$54,432.00 |
$51,840.00 |
$51,840.00 |
|
$2,268.00 |
$2,592.00 |
$0.00 |
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Spending Variance |
Efficiency Variance |
Never a Varaiance |
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Favorable |
Unfavorable |
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For June 2017, each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor- hour is $ 12.00 . The budgeted number of suits to be manufactured in June 2017 is 1,040.00
Actual variable manufacturing costs in June 2017 were $ 52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536.00
1. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.
Exercise 8-22 Fixed manufacturing overhead, variance analysis (continuation of 8-21)
Esquire Clothing allo- cates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2017 are budgeted, $ 62,400 and actual, $ 63,916.00
1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.
2. Compute the production-volume variance for June 2017. What inferences can Esquire Clothing draw from this variance?
| Budgeted fixed overhead rate per unit of allocation base = |
$15.00 |
Per hour |
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Actual Costs Incurred |
Same Budgeted lump |
Flexible Budget: Same |
Budgeted Input Qty allowed |
|
(Act Input Qt*actual rate) |
Sun as in Static Budget |
Budgeted lump sum |
for act output*bud rate) |
|
63,916.00 |
62,400 |
62,400 |
$64,800.00 |
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1,516.00 |
U |
0 |
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$2,400.00 |
F |
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Spending Variance |
Never a Variance |
Production Volume Variance |
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| Flexible Budget Variance |
$1,516.00 |
U |
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| Production Volume Variance |
$2,400.00 |
F |
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Exercise 8-23 Variable manufacturing overhead variance analysis.
The Sourdough Bread Company bakes ba- guettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. Following is some budget data for the Sourdough Bread Company:
| Direct manufacturing labor use |
|
0.02 |
hours per baguette |
| Variable manufacturing overhead |
|
$10.00 |
per direct manufacturing labor-hour |
The Sourdough Bread Company provides the following additional data for the year ended December 31, 2017:
| Planned (budgeted) output |
|
3,100,000 |
baguettes |
| Actual production |
|
|
2,600,000 |
baguettes |
| Direct manufacturing labor |
|
46,800 |
hours |
| Actual variable manufacturing overhead |
$617,760 |
|
1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is Sourdough Bread budgeting?)
2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-4 (page 304) for reference.
Exercise 8-24 Fixed manufacturing overhead variance analysis (continuation of 8-23).
The Sourdough Bread Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2017, fixed manufacturing overhead was budgeted at $ 3 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $ 294,000
1. Prepare a variance analysis of fixed manufacturing overhead cost. Use Exhibit 8-4 (page 304) as a guide.
2. Is fixed overhead underallocated or overallocated? By what amount?
Exercise 8-25 Manufacturing overhead, variance analysis.
The Rotations Corporation is a manufacturer of cen- trifuges. Fixed and variable manufacturing overheads are allocated to each centrifuge using budgeted assembly-hours. Budgeted assembly time is 2 hours per unit. The following table shows the budgeted amounts and actual results related to overhead for June 2017.
| The Rotation Corporation (2017) |
|
|
Actual |
Static |
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Result |
Budget |
| Number of centrifuges assembled and sold |
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220 |
150 |
| Hours of assembly time |
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396 |
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Variable manufacturing overhead cost per hour of assembly time
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$31.00 |
| Variable manufacturing overhead costs |
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$12,693.00 |
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| Fixed manufacturing overhead costs |
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$15,510.00 |
$14,100.00 |
Budgeted assembly time 2
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances using the columnar approach in Exhibit 8-4 (page 304).
2. Prepare journal entries for Rotations' June 2017 variable and fixed manufacturing overhead costs and variances; write off these variances to Cost of Goods Sold for the quarter ending June 30, 2017.
Exercise 8-26 4-variance analysis, fill in the blanks.
ProChem, Inc., produces chemicals for large biotech compa- nies. It has the following data for manufacturing overhead costs during August 2017:
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Variable |
Fixed |
| Actual costs incurred |
|
$35,000 |
$16,500 |
| Costs allocated to products |
$36,000 |
$15,200 |
| Flexible budget |
|
|
$16,000 |
| Actual input * budgeted rate |
$31,500 |
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Fill in the blanks. Use F for favorable and U for unfavorable:
Exercise 8-27 Straightforward 4-variance overhead analysis.
The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part,
based on a denominator level of 4,000 output units per year, included 6 machine-hours of variable manufacturing overhead at $8.00 per hour and 6 machine-hours of fixed manufacturing overhead at $ 15 per hour.
Actual output produced was 4,400 units. Variable manufacturing overhead incurred was $ 245,000 . Fixed manufacturing overhead incurred was $ 373,000 . Actual machine-hours were 28,400.00
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead vari- ances, using the 4-variance analysis in Exhibit 8-4 (page 304).
2. Prepare journal entries using the 4-variance analysis.
3. Describe how individual fixed manufacturing overhead items are controlled from day to day.
4. Discuss possible causes of the fixed manufacturing overhead variances.