Problem 16-72 (Static) Variance Computations with Missing Data (LO 16-5, 6)The following information is provided to assist you in evaluating the performance of the production operations of Studio Company: Units produced (actual)42,000Master production budget Direct materials$132,000Direct labor112,000Overhead159,200Standard costs per unit Direct materials$1.65 × 2 gallons per unit of outputDirect labor$14 per hour × 0.2 hour per unitVariable overhead$11.90 per direct labor-hourActual costs Direct materials purchased and used$150,960 (81,600 gallons)Direct labor111,708 (8,560 hours)Overhead163,200 (61% is variable) Variable overhead is applied on the basis of direct labor-hours. Required:Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Name: Problem 16-72 (Static) Variance Computations with Missing Data (LO 16-
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Description: Problem 16-72 (Static) Variance Computations with Missing Data (LO 16-5, 6)The following information is provided to assist you in evaluating the performance of the production operations of Studio Company: Units produced (actual)42,000Master produ

Introduction:- The typical manufacturing overhead is $1.65 per gallon, and the usual amount of raw materials required per unit of output is 2 gallons. The difference between the real direct material cost and the standard cost of the actual volume utilized is known as the direct material price variation. A total of $150,960 was spent on direct material costs. The real amount consumed in the manufacturing process is 81,600 gallons. The average price per gallon is $1.65 Direct Material price Variance = Actual direct material cost - Standard cost of actual quantity used = $150,960 - ($1.65 x 81,600) = $150960 - $134640 = $16320The ratio between the standard cost of the real quantity utilized and the standard cost of the standard amount to be used for real production is known as the direct material efficiency variance. Direct material efficiency variance = ($1.65 x 81600) - ($1.65 x 42000 x2) =($134640-$138600) = -$3960 The difference between real direct labor costs paid and the standard labor costs for the actual labor hours taken is known as the direct labor cost variation. The total cost of direct labor is $111,908. The real direct labor hours required to produce 42,000 units is 8560 hours. The hourly wage in the United States is $14. Direct labor cost variance = Actual cost - (Standard cost of actual labor hours) = $ 111,708 - ($14 x 8560) = $ 111708 - $119840 = -$8132 The difference between the standard cost of actual labor hours taken and the standard cost of standard labor hours to be employed for real production of 42,000 units is the straight efficiency variance. The typical work hour is 0.2 hours per unit of output. The normal hourly rate is $14. The actual work hours required for manufacture are 8560. Direct labor efficiency variance = (std cost for actual labor hours - std cost for standard labor hours) = ($14 x 8560)-($14x42000x0.2) = $119840-$117600 = $2240 The real overhead cost is 163,200, with variable costs accounting for 61% of the total, or $99,552. $11.90 is the normal variable cost per labor hour. The total number of standard direct work hours required to produce 42,000 units is 8400. (42000 x 0.2 hrs) Variable overhead cost = $163200 x 61% = $99552 Variable cost variance = Actual cost - (standard cost of actual labor hours) = $163200 - ($11.90 x 8560) = $99552 - $101864 = -$2312 The difference between the standard cost of actual labor time taken for actual production and the standard cost of standard labor hours used for real production is the variable costs efficient variance. Variable overhead efficiency variance = ($11.90 x 8560)-($11.90x42000x0.2) = $1904 The difference between the actual fixed overhead cost (which is 39% of $163200) and the projected fixed overhead cost of $59,240 is the total fixed pricing variation. The budgeted fixed expense is the difference between the overall budgeted overhead of $159200 and the typical variable expense of 99,960 Fixed overhead actual cost = $163200 x39% = $ 63648 Standard variable overhead = $11.90 x 42000 x 0.2 =$99960 Fixed standard overhead = total budgeted overhead - standard variable overhead = $159200-$99960 = $59240 Fixed overhead price variance = $63648-$59240 = $4408 The difference between the anticipated fixed overhead costs and the actual fixed overhead costs is known as the fixed overhead efficiency variance. Fixed overhead rate per unit is calculated as: Fixed overhead cost = $159200 - $99960 = $59240 Fixed overhead rate per hour = $592408400 = $7.05 Fixed overhead rate per unit = $7.05 x0.2 = $1.41 The fixed overhead applied for the output of 42000 unit is: Fixed overhead applied = $1.41 x 42000 = $59220 The gap between the budgeted and actual overhead costs is known as the production volume variation. Production volume variance = $59240 - $59220 = $20

Answered: Problem 16-72 (Static) Variance…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 16-72 (Static) Variance Computations with Missing Data (LO 16-5, 6)

The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:


Units produced (actual)	42,000
Master production budget
Direct materials	$132,000
Direct labor	112,000
Overhead	159,200
Standard costs per unit
Direct materials	$1.65 × 2 gallons per unit of output
Direct labor	$14 per hour × 0.2 hour per unit
Variable overhead	$11.90 per direct labor-hour
Actual costs
Direct materials purchased and used	$150,960 (81,600 gallons)
Direct labor	111,708 (8,560 hours)
Overhead	163,200 (61% is variable)

Variable overhead is applied on the basis of direct labor-hours.

Required:

Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

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