Chapter 11, Problem 1TF15

1.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have occurred when actual goods were manufactured.

Raw material cost in company’s planning budget for March.

Answer to Problem 1TF15

The raw material cost in company’s planning budget for March is $1,000,000.

Explanation of Solution

  $Rawmaterial\cos t=\left(\begin{array}{l}Rawmaterialrequiredperunit\\ \times Rawmaterialcoctperunit\\ \times PlanningsalesunitsinMarch\end{array}\right)$

  $\begin{array}{l}Rawmaterial\cos t=\text{ 5}\times 8\times 25,000\\ Rawmaterial\cos t=\text{ \$1,000,000}\end{array}$

2.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Raw material cost in company’s flexible budget for March.

Answer to Problem 1TF15

The raw material cost in company’s flexible budget for March is $1,200,000.

Explanation of Solution

  $Rawmaterial\cos t=\left(\begin{array}{l}Rawmaterialrequiredperunit\\ \times Rawmaterialcoctperunit\\ \times PlanningsalesunitsinMarch\end{array}\right)$

  $\begin{array}{l}Rawmaterial\cos t=\text{ 5}\times 8\times 30,000\\ Rawmaterial\cos t=\text{ \$1,200,000}\end{array}$

3.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Materials price variance for March.

Answer to Problem 1TF15

The materials price variance for March is $80,000.

Explanation of Solution

  $Rawmaterialprice\mathrm{var}iation=\left(\begin{array}{l}Volumeofrawmaterial\\ \times \left(\begin{array}{l}Actualrawmaterialpriceperpound\\ -\mathrm{Pr}icepaidforrawmaterialperpound\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Rawmaterialprice\mathrm{var}iation=\text{ \$160,000}\times \text{(\$8-\$7}\text{.5)}\\ Rawmaterialprice\mathrm{var}iation=\text{ \$80,000}\end{array}$

4.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Materials quantity variance for March.

Answer to Problem 1TF15

The materials quantity variance for March is $80,000.

Explanation of Solution

  $Rawmaterialquantity\mathrm{var}iation=\left(\begin{array}{l}Rawmaterialprice\\ \times \left(\begin{array}{l}Purchaseofrawmaterial\\ -\left(\begin{array}{l}Sellingunit\times \\ Rawmaterialrequiredforproducing1unit\end{array}\right)\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Rawmaterial\text{ quantity }\mathrm{var}iation=\text{ 8}\times \text{(160,000-(30,000}\times 5))\\ Rawmaterial\text{ quantity }\mathrm{var}iation=\text{ \$80,000}\end{array}$

5.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Material Price Variance for March if 170,000 of materials was purchased at $7.50 per pound and 160,000 was used in productions.

Answer to Problem 1TF15

Material Price Variance for March if 170,000 of materials were purchased at $7.50 per pound and 160,000 were used in productions is $85,000.

Explanation of Solution

  $Rawmaterialprice\mathrm{var}iation=\left(\begin{array}{l}Volumeofrawmaterial\\ \times \left(\begin{array}{l}Actualrawmaterialpriceperpound\\ -\mathrm{Pr}icepaidforrawmaterialperpound\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Rawmaterialprice\mathrm{var}iation=\text{ 170,000}\times \text{(\$8-7}\text{.5)}\\ Rawmaterialprice\mathrm{var}iation=\$85,000\end{array}$

6.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Material Quantity Variance for March if 170,000 of materials was purchased at $7.50 per pound and 160,000 was used in productions.

Answer to Problem 1TF15

Material Quantity Variance for March if 170,000 of materials were purchased at $7.50 per pound and 160,000 were used in productions is $80,000.

Explanation of Solution

  $Rawmaterialquantity\mathrm{var}iance=\left(\begin{array}{l}Rawmaterialprice\\ \times \left(\begin{array}{l}Purchaseofrawmaterial\\ -\left(\begin{array}{l}Sellingunit\\ \times Rawmaterialrequiredforproducing1unit\end{array}\right)\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Rawmaterialquantity\mathrm{var}iance=\text{ 8}\times \text{(170,000-160,000)}\\ Rawmaterialquantity\mathrm{var}iance=\text{ \$80,000}\end{array}$

7.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Direct labor cost in company’s planning budget for March.

Answer to Problem 1TF15

The direct labor cost in company’s planning budget for March is $770,000

Explanation of Solution

  $Directlabor\cos t=\left(\begin{array}{l}Directlaborhour\\ \times Directlabor\cos tpaidperhour\end{array}\right)$

  $\begin{array}{l}Directlabor\cos t=\text{ 55,000}\times 14\\ Directlabor\cos t=\text{ \$770,000}\end{array}$

8.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Direct labor cost in company’s flexible budget for March.

Answer to Problem 1TF15

The direct labor cost in company’s flexible budget for March is $840,000

Explanation of Solution

  $Directlabor\cos t=\left(\begin{array}{l}Salesunit\\ \times Directlabor\cos tpaidperhour\\ \times Hoursrequiredtoproduce1unit\end{array}\right)$

  $\begin{array}{l}Directlabor\cos t=\text{ 30,000}\times \text{14}\times 2\\ Directlabor\cos t=\text{ \$840,000}\end{array}$

9.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Labor rate variance for March.

Answer to Problem 1TF15

The labor rate variance for March is $55,000.

Explanation of Solution

  $Laborrate\mathrm{var}iance=\left(\begin{array}{l}Directlaborhours\\ \times \left(\begin{array}{l}Actuallabor\cos tperhour\\ -Labor\cos tpaidperhour\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Laborrate\mathrm{var}iance=\text{ 55,000}\times \text{(15-14)}\\ Laborrate\mathrm{var}iance=\text{ \$55,000}\end{array}$

10.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Labor efficiency variance for March.

Answer to Problem 1TF15

Labor efficiency variance for March is 70,000

Explanation of Solution

  $Laborefficiency\mathrm{var}iance=\left(\begin{array}{l}Labor\cos tpaidperhour\\ \times \left(\begin{array}{l}Directlaborhour\\ -\left(\begin{array}{l}Salesunit\\ \times Hoursrequiredtoproduce1unit\end{array}\right)\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Laborefficiency\mathrm{var}iance=\text{ 14}\times (55,000-(30,000\times 2))\\ Laborefficiency\mathrm{var}iance=70,000\end{array}$

11.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Labor spending variance for March.

Answer to Problem 1TF15

The Labor spending variance for March is $15,000

Explanation of Solution

  $Laborspending\mathrm{var}iance=\left(\left(\begin{array}{l}Salesunit\\ \times Directlabor\cos tpaidperhour\\ \times Hoursrequiredtoproduce1unit\end{array}\right)-\left(\begin{array}{l}Directlaborhour\\ \times Actuallabor\cos t\end{array}\right)\right)$

  $\begin{array}{l}Laborspending\mathrm{var}iance=(30,000\times 14\times 2)-(55,000\times 15)\\ Laborspending\mathrm{var}iance=15,000\end{array}$

12.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Variable manufacturing overhead cost in company’s planning budget for March.

Answer to Problem 1TF15

The variable manufacturing overhead cost in company’s planning budget for March is $250,000.

Explanation of Solution

  $Variableoverhead\cos t=\left(\begin{array}{l}Planningsalesunit\\ \times Variableoverhead\cos tperhour\\ \times Variableovereheadhoursrequiredtoproduce1unit\end{array}\right)$

  $\begin{array}{l}Variableoverhead\cos t=\text{ 25,000}\times 5\times 2\\ Variableoverhead\cos t=\text{ \$250,000}\end{array}$

13.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Variable manufacturing overhead cost in company’s flexible budget for March.

Answer to Problem 1TF15

The variable manufacturing overhead cost in company’s flexible budget for March is $300,000.

Explanation of Solution

  $Variableoverhead\cos t=\left(\begin{array}{l}\text{Flexible }salesunit\\ \times Variableoverhead\cos tperhour\\ \times Variableovereheadhoursrequiredtoproduce1unit\end{array}\right)$

  $\begin{array}{l}Variableoverhead\cos t=\text{ 30,000}\times \text{5}\times \text{2}\\ Variableoverhead\cos t=\text{ \$300,000}\end{array}$

14.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Variable overhead rate variance for March.

Answer to Problem 1TF15

The variable overhead rate variance for March is $5,500.

Explanation of Solution

  $Variableoverheadrate\mathrm{var}iance=\left(\begin{array}{l}Totalmanufacturingoverhead\\ -\left(\begin{array}{l}Laborworkhours\\ \times Variableoverhead\cos tperhour\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Variableoverheadrate\mathrm{var}iance=\text{ 280,500 -(55,000}\times \text{5)}\\ Variableoverheadrate\mathrm{var}iance=\text{ \$5,500}\end{array}$

15.

To determine

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Variable overhead efficiency variance for March.

Introduction: Standard costing means the accounting system which is used by manufacturers mainly to identify variances or difference that occur in cost. The difference is identified between actual cost of goods that were manufactured and those cost which should have oc mapping the formal plan.

Variable overhead efficiency variance for March.

Answer to Problem 1TF15

The variable overhead efficiency variance for March is $25,000.

Explanation of Solution

  $Variableoverheadefficiency\mathrm{var}iance=\left(\begin{array}{l}Variableoverhead\cos tperhour\\ \times \left(\begin{array}{l}\left(\begin{array}{l}Flexiblesalesunit\\ \times Variableoverheadhoursrequiredtoproduce1unit\end{array}\right)\\ -laborworkhours\end{array}\right)\end{array}\right)$

  $\begin{array}{l}Variableoverheadefficiency\mathrm{var}iance=5\times ((30,000\times 2)-55,000)\\ Variableoverheadefficiency\mathrm{var}iance=\$25,000\end{array}$