Survey Of Accounting
Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 2ATC

a)1

To determine

Determine the total materials cost variance, price and usage variance, the cause of variance and responsible management position.

a)1

Expert Solution
Check Mark

Explanation of Solution

Compute the total variance:

Total variances=|Actual costStandard cost|×Actual units=|$44.10$40.00|×82,000=$4.1×82,000=$336,200

Hence, the total variances are $336,200 which is an unfavorable variance.

Compute the total materials price variance:

Materials price variances=|Actual priceStandard price|×Actual quantity=|$2.10$2.00|×(21×82,000 )=$172,200

Hence, the total materials price variances are $172,200 which is an unfavorable variance.

Compute the total materials usage variance:

Materials usage variance=|Actual quantityStandard quantity|×Standard price=|(21×82,000)(20×82,000)|×$2.00=|(1,722,0001,640,000)|×$2=$164,000

Hence, the total materials usage variances are $164,000 which is unfavorable variance.

K Company paid more than the budgeted for planks of wood.

The purchasing agent is responsible for the price variance. The variances are occurred because of factors like lumber shortage, and inflation.

K Company used more materials than planned which leads to unfavorable usage variance.

The production supervisor is the responsible party. The variances are occurred because of factors like lack of physically control over inventory and lack of motivation to workers.

2)

To determine

Determine the labor cost, price, and usage variance and the cause of variance and responsible management position.

2)

Expert Solution
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Explanation of Solution

Compute the total labor cost variance:

Labor variance=|Actual costStandard cost|×Actual units=|$26.10$25.50|×82,000=$49,200

Hence, the labor variance is $49,200 which is an unfavorable variance.

Compute the labor price variance:

Labor price variance=|Actual priceStandard price|×Actual hours=|($9.00$8.50)|×(2.9×82,000)=$118,900

Hence, the labor price variance is $118,900 which is an unfavorable variance.

Compute the labor usage variance:

Labor usage variance=|Actual quantityStandard quantity|×Standard price=|(2.9×82,0003.0×82,000)|×$8.50=|(237,800246,000)|×$8.50=$69,700

Hence, the labor usage variance is $69,700 which is a favorable variance.

K Company paid more than the budgeted.

The personnel manager and production supervisors are responsible for the variance. The variances are occurred because of factors like the minimum wages could have been raised by the government.

K Company used less labor than planned which leads to favorable usage variance.

The production supervisor or personal managers are the responsible party. These people motivate the employees and hired more competent people.

3)

To determine

Determine the fixed cost spending and variance and the cause of variance and refer whether the actual fixed cost per unit is lower or higher than the budgeted fixed cost per unit.

3)

Expert Solution
Check Mark

Explanation of Solution

Compute the fixed cost spending variance:

Survey Of Accounting, Chapter 15, Problem 2ATC , additional homework tip  1

Table (1)

Hence, the spending variance is $48,400 which is unfavorable variance.

Compute the fixed cost volume variance:

Survey Of Accounting, Chapter 15, Problem 2ATC , additional homework tip  2

Table (2)

Hence, the volume variance is $32,000 which is favorable variance.

Working note:

Calculate the the predetermined overhead rate:

Predetermined overhead rate=Total expected overhead costsTotal expected units=$1,280,00080,000=$16 per table

Hence, the predetermined overhead rate is $16 per table.

The Company K has paid more than the planned with respect to fixed cost. The plant manager is responsible for the rent on manufacturing equipment. The personnel manager is responsible for the salaries paid to the company supervisor.

More units were produced and sold which leads to favorable volume variance. This reduces the fixed cost per unit.

b)

To determine

Indicate that the total of material, labor, and overheads variance are equal to the total flexible budget variance.

b)

Expert Solution
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Explanation of Solution

Note:

Refer the above part for the calculated values.

Survey Of Accounting, Chapter 15, Problem 2ATC , additional homework tip  3

Table (3)

c)

To determine

Discuss the reaction of Person D reacts to the variance information

c)

Expert Solution
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Explanation of Solution

Discuss the reaction of Person D reacts to the variance information:

Person D should make an impartible and fair investigation on the responsible parties and causes.

Monitoring the performance is sufficient for the improvement and in the circumstances of intentional disregard and consistent incompetence the disciplinary actions can be taken.

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Survey Of Accounting

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