Explanation Solution: Spending Variance: Spending variance is the deviation of actual expenses from the budgeted expenses. Efficiency Variance: Efficiency variance is the variation between actual quantity of input and estimated quantity of input purchased for a particular price. Production-Volume Variance: Production volume variance determines the amount of overhead employed to the quantity produced. It is the variation between the actual quantity manufactured and estimated quantity that should have been manufactured multiplied by budgeted overhead rate. CASE A Fixed overhead spending variance for A Given, Actual cost incurred is $84,920. Flexible budget amount is $88,200. Formula to calculate spending variance: Spending variance = Actual costs incurred − Flexible Budget amount Substitute $84,920 for actual cost incurred and $88,200 for flexible budget amount, Spending variance = $84,920 − $ 88 , 200 = $ 3 , 280 ( U ) Hence blank number 15 (A) will be filled with fixed overhead spending variance of $3,280 (U). Budgeted fixed overhead rate for A Given, Standard manufacturing fixed overhead cost is $86,800. Standard machine hours allowed for actual output achieved is 6,200 hours. Formula to calculate budgeted fixed overhead rate: Budgeted fixed overhead rate = ( Standard manufacturing fixed overhead cost Standard machine hours allowed for actual output achieved ) Substitute, $86,800 for standard manufacturing fixed overhead cost and 6,200 hours for standard machine hours allowed for actual output achieved, Budgeted fixed overhead rate = ( $86,800 6,200 hours ) = $ 14 per hour Thus, blank 5 (A) will be filled with budgeted fixed overhead rate of $14 per hour. Production volume variance Given, Budgeted fixed overhead is $88,200. Standard fixed overhead allocated for actual output produced is $86,800. Formula to calculate production volume variance: Production volume variance = ( Budgeted fixed overhead − ( Standard fixed overhead allocated for actual output produced ) ) Substitute $88,200 for budgeted fixed overhead and $86,800 for standard fixed overhead allocated for actual output produced, Production volume variance = $88,200 − $86,800 = $ 1 , 400 F Thus, blank 12 (A) will be filled with production volume variance of $1,400 F. Budgeted variable overhead cost Given, Variable manufacturing overhead spending variance is $5,000 (F). Variable overhead incurred is $120,400. Formula to calculate budgeted variable overhead cost: Spending variance = ( Variable overhead incurred − Budgeted variable overhead ) Substitute $5,000 for spending variance and $120,400 for variable overhead incurred, − $ 5 , 000 = $ 120 , 400 − Budgeted variable overhead Budgeted variable overhead = $ 120 , 400 + $ 5 , 000 = $ 125 , 400 Thus, blank 8 (A) will be filled with budgeted variable overhead of $125,400. Total budgeted manufacturing overhead Given, Budgeted variable overhead is $125,400 Budgeted fixed overhead is $88,200 Formula to calculate total budgeted manufacturing overhead: Total budgeted manufacturing overhead = ( Budgeted variable overhead + Budgeted fixed overhead ) Substitute $125,400 for budgeted variable overhead and $88,200 for budgeted fixed overhead, Total budgeted manufacturing overhead = $ 125 , 400 + $ 88 , 200 = $ 213 , 600 Thus blank 9 (A) will be filled with total budgeted manufacturing overhead of $213,600. Total budgeted machine hours or denominator level Given, Budgeted fixed overhead cost is $88,200 Budgeted fixed overhead rate as calculated above is $14 per hour. Formula to calculate total budgeted machine hours: Total budgeted machine hours = Budgeted fixed overhead cost Budgeted fixed overhead rate Substitute $88,200 for budgeted fixed overhead cost and $14 per hour for budgeted fixed overhead rate, Total budgeted machine hours = $88,200 $14 per hour = 6 , 300 hours Thus, blank 3 (A) will be filled with denominator level of 6,300 hours. Variable manufacturing overhead rate Given, Budgeted variable overhead cost of $125,400 Total budgeted machine hours as calculated above are 6,300 hours. Formula to calculate variable manufacturing overhead: Variable manufacturing overhead = Budgeted variable overhead cost Total budgeted machine hours Substitute $125,400 for budgeted variable overhead cost and $6,300 hours for total budgeted machine hours, Variable manufacturing overhead = $ 125 , 400 6,300 hours = $ 19.91 per hour Thus, blank 6 (A) will be filled with variable manufacturing overhead rate of $19.91 per hour. Actual machine hours Given, Actual variable overhead cost is $120,400. Spending variance of variable overhead cost is $5,000. Budgeted variable manufacturing overhead rate is $19.91 per hour Formula to calculate actual machine hours: Spending variance = [ Actual variable costs incurred − ( Budgeted variable manufacturing overhead rate × Actual machine hours ) ] Substitute $120,400 for actual variable overhead cost, $5,000 for spending variance and $19.91 for budgeted variable manufacturing overhead rate, − $5,000 = [ $120,400 − ( 19.91 × Actual machine hours ) ] Actual machine hours = $ 120 , 400 + $ 5 , 000 $ 19.91 per hour = 6 , 298 hours Thus, blank 16 (A) will be filled with actual machine hours of 6,298 hours. Efficiency variance Given, Actual variable overhead cost is $120,400. Actual machine hours as compute are 6,298 hours. Budgeted variable manufacturing overhead rate is $19.91. Formula to calculate efficiency variance: Efficiency variance = [ ( Actual quantity of input − Budgeted quantity of input for actual output ) × Budgeted variable rate ] Substitute 6,298 hours for actual quantity of input, 5,000 hours for budgeted quantity of input for actual output and $19.91for budgeted variable rate, Efficiency variance = ( 6 , 298 − 5 , 000 ) hours × 19 .91 per hour = 1 , 298 hours × 19

15th Edition

ISBN: 9780133428834

Author: Horngren

Publisher: PEARSON

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Chapter 8 Solutions

Cost Accounting

Ch. 8 - How do managers plan for variable overhead costs?Ch. 8 - How does the planning of fixed overhead costs...Ch. 8 - How does standard costing differ from actual...Ch. 8 - What are the steps in developing a budgeted...Ch. 8 - What are the factors that affect the spending...Ch. 8 - Assume variable manufacturing overhead is...Ch. 8 - Describe the difference between a direct materials...Ch. 8 - What are the steps in developing a budgeted fixed...Ch. 8 - Why is the flexible-budget variance the same...Ch. 8 - Explain how the analysis of fixed manufacturing...

Ch. 8 - Provide one caveat that will affect whether a...Ch. 8 - The production-volume variance should always be...Ch. 8 - What are the variances in a 4-variance analysis?Ch. 8 - Overhead variances should be viewed as...Ch. 8 - Describe how flexible-budget variance analysis can...Ch. 8 - Prob. 8.16E Ch. 8 - Prob. 8.17E Ch. 8 - Prob. 8.18E Ch. 8 - Prob. 8.19E Ch. 8 - Prob. 8.20E Ch. 8 - Prob. 8.21E Ch. 8 - Straightforward 4-variance overhead analysis. The...Ch. 8 - Prob. 8.23E Ch. 8 - Prob. 8.24E Ch. 8 - Prob. 8.25E Ch. 8 - Prob. 8.26E Ch. 8 - Prob. 8.27E Ch. 8 - Prob. 8.28E Ch. 8 - Prob. 8.29E Ch. 8 - Prob. 8.30P Ch. 8 - Prob. 8.31P Ch. 8 - Prob. 8.32P Ch. 8 - Prob. 8.33P Ch. 8 - Prob. 8.34P Ch. 8 - Prob. 8.35P Ch. 8 - Prob. 8.36P Ch. 8 - Prob. 8.37P Ch. 8 - Prob. 8.38P Ch. 8 - Prob. 8.39P Ch. 8 - Prob. 8.40P Ch. 8 - Prob. 8.41P Ch. 8 - Prob. 8.42P Ch. 8 - Prob. 8.43P

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