Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)

16th Edition

ISBN: 9780134642468

Author: Srikant M. Datar, Madhav V. Rajan

Publisher: PEARSON

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Textbook Question

Chapter 8, Problem 8.34E

Flexible-budget variances, review of Chapters 7 and 8. Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used.

At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the following standards for each doorknob:

	Input	Cost/Doorknob
Direct materials (brass)	0.3 lb. @ $10/lb.	$ 3.00
Direct manufacturing labor	1.2 hours @ $17/hour	20.40
Manufacturing overhead:
Variable	$5/lb. × 0.3 lb.	1.50
Fixed	$15/lb. × 0.31lb.	4.50
Standard cost per doorknob		$29.40

Actual results for April 2017 were as follows:

Production	29,000 doorknobs
Direct materials purchased	12,400 lb. at $11/lb.
Direct materials used	8,500 lbs.
Direct manufacturing labor	29,200 hours for $671,600
Variable manufacturing overhead	$ 65,100
Fixed manufacturing overhead	$158,000

A. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U):

Required

a. Direct materials price variance (based on purchases)
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Variable manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production-volume variance
h. Fixed manufacturing overhead spending variance
B. Can Williams use any of the variances to help explain any of the other variances? Give examples.

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Chapter 8, Problem 8.33E

Chapter 8, Problem 8.35P

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Chapter 8 Solutions

Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)

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 - Each of the following statements is correct...Ch. 8 - Steed Co. budgets production of 150,000 units in...Ch. 8 - As part of her annual review of her companys...Ch. 8 - Culpepper Corporation had the following...Ch. 8 - Fordham Corporation produces a single product. The...Ch. 8 - Variable manufacturing overhead, variance...Ch. 8 - Fixed manufacturing overhead, variance analysis...Ch. 8 - Variable manufacturing overhead variance analysis....Ch. 8 - Fixed manufacturing overhead variance analysis...Ch. 8 - Manufacturing overhead, variance analysis. The...Ch. 8 - 4-variance analysis, fill in the blanks. ProChem...Ch. 8 - Straightforward 4-variance overhead analysis. The...Ch. 8 - Straightforward coverage of manufacturing...Ch. 8 - Overhead variances, service sector. Meals Made...Ch. 8 - Total overhead, 3-variance analysis. Pampered...Ch. 8 - Production-volume variance analysis and...Ch. 8 - Overhead variances, service setting. Carlyle...Ch. 8 - Identifying favorable and unfavorable variances....Ch. 8 - Flexible-budget variances, review of Chapters 7...Ch. 8 - Comprehensive variance analysis. Cooking Whiz...Ch. 8 - Journal entries (continuation of 8-35). A. Prepare...Ch. 8 - Graphs and overhead variances. Best Around, Inc.,...Ch. 8 - Overhead variance, missing information. Consider...Ch. 8 - Flexible budgets, 4-variance analysis. (CMA,...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Overhead variances and sales-volume variance. The...Ch. 8 - Activity-based costing, batch-level variance...Ch. 8 - Comprehensive review of Chapters 7 and 8, working...Ch. 8 - Review of Chapters 7 and 8, 3-variance analysis....Ch. 8 - Nonfinancial variances. Kathys Kettle Potato Chips...Ch. 8 - Overhead variances, service sector. Cavio is a...Ch. 8 - Direct-cost and overhead variances, income...Ch. 8 - Overhead variances, ethics. Carpenter Company uses...

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Solution Summary: The author explains that Variance Analysis is the process of ascertaining the deviations between actual and planned output.

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