ADM 3346 Chapter Notes - Chapter 8: Fixed Cost, Pro Rata, Radiance

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3 Oct 2017

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Chapter 8: flexible budget, variances, and management control: ii: some fixed costs are locked in by legal contracts for terms as short as one year, such as salaries and insurance. Journal entries for fixed overhead costs and variances output * budgeted fixed overhead rate: to record actual fixed overhead cost incurred, fmoh control. Xxx: to record fixed overhead costs allocated, salaries, tax, leases. Xxx: record variances for the accounting period. Xxx: fmoh allocated, fmoh rate variances, fmoh pvv. If the fmoh variance is immaterial may be written off to cogs, wip. If pvv is the result of abnormally high production output, the implication is that the. Fmoh allocation rate should be recalculated and inventory unit costs reduced: favourable pvv, fmoh production volume variance, cogs. Three-variance analysis: variable oh spending variance + total oh efficiency variance (variable and. Fixed) + fixed oh volume variance = total oh variance.

Related Questions

The predetermined overhead rate ($18.50 per direct labor hour)is based on an expected volume of 75% of the factoryâs capacity of20,000 units per month. Following are the companyâs budgetedoverhead costs per month at the 75% capacity level. Overhead Budget(75% Capacity) Variable overhead costs Indirect materials $ 15,000Indirect labor 75,000 Power 15,000 Repairs and maintenance 30,000Total variable overhead costs $ 135,000 Fixed overhead costsDepreciationâBuilding 25,000 DepreciationâMachinery 70,000 Taxesand insurance 17,000 Supervision 308,000 Total fixed overhead costs420,000 Total overhead costs $ 555,000

The company incurred the following actual costs when it operatedat 75% of capacity in October. Direct materials (46,000 Ibs. @$4.20 per lb.) $ 193,200 Direct labor (22,000 hrs. @ $14.30 perhr.) 314,600 Overhead costs Indirect materials $ 41,900 Indirectlabor 176,650 Power 17,250 Repairs and maintenance 34,500DepreciationâBuilding 25,000 DepreciationâMachinery 94,500 Taxesand insurance 15,300 Supervision 308,000 713,100 Total costs $1,220,900 rev: 03_28_2018_QC_CS-122864

Required: 1&2. Prepare flexible overhead budgets for Octobershowing the amounts of each variable and fixed cost at the 65%,75%, and 85% capacity levels and classify all items listed in thefixed budget as variable or fixed.

3. Compute the direct materials cost variance,including its price and quantity variances.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

4. Compute the direct labor cost variance,including its rate and efficiency variances.

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

5. Prepare a detailed overhead variance reportthat shows the variances for individual items of overhead.Requiredinformation [The following information applies to the questionsdisplayed below.] Antuan Company set the following standard costsfor one unit of its product. Direct materials (3.0 Ibs. @ $4.00 perIb.) $ 12.00 Direct labor (2.0 hrs. @ $14.00 per hr.) 28.00Overhead (2.0 hrs. @ $18.50 per hr.) 37.00 Total standard cost $77.00

goldbeetle62

The following data were drawn from the records of StuartCorporation.


Planned volume for year (staticbudget)		4,100	units
Standard direct materials costper unit		3.00	pounds	@	$	1.60	per pound
Standard direct labor cost perunit		2.80	hours	@	$	4.50	per hour
Total expected fixed overheadcosts	$	15,580
Actual volume for the year(flexible budget)		4,300	units
Actual direct materials cost perunit		2.70	pounds	@	$	2.00	per pound
Actual direct labor cost perunit		3.20	hours	@	$	4.20	per hour
Total actual fixed overheadcosts	$	11,880

Required

Prepare a materials variance information table showing thestandard price, the actual price, the standard quantity, and theactual quantity.

Calculate the materials price and usage variances. Indicatewhether the variances are favorable (F) or unfavorable (U).

Prepare a labor variance information table showing the standardprice, the actual price, the standard hours, and the actualhours.

Calculate the labor price and usage variances. Indicate whetherthe variances are favorable (F) or unfavorable (U).

Calculate the predetermined overhead rate, assuming that Stuartuses the number of units as the allocation base.

Calculate the fixed cost spending variance. Indicate whether thevariance is favorable (F) or unfavorable (U).

Calculate the fixed cost volume variance. Indicate whether thevariance is favorable (F) or unfavorable (U).

Prepare a materials variance information table showing thestandard price, the actual price, the standard quantity, and theactual quantity. (Round "Standard price" and "Actual price" to 2decimal places.)

Materials Variance Information Table
Standardprice		perpound
Actualprice		perpound
Standardquantity for flexible budget		pounds
Actualquantity used		pounds

Calculate the materials price and usage variances. Indicatewhether the variances are favorable (F) or unfavorable (U). (Select"None" if there is no effect (i.e., zero variance).)


Materialprice variance
Materialusage variance

Prepare a labor variance information table showing the standardprice, the actual price, the standard hours, and the actual hours.(Round "Standard price" and "Actual price" to 2 decimalplaces.)

Labor Variance Information Table
Standardprice		perhour
Actualprice		perhour
Standardhours for flexible budget
Actualhours used

Calculate the labor price and usage variances. Indicate whetherthe variances are favorable (F) or unfavorable (U). (Select "None"if there is no effect (i.e., zero variance).)


Laborprice variance
Laborusage variance

Calculate the predetermined overhead rate, assuming that Stuartuses the number of units as the allocation base. Calculate thefixed cost spending variance and the fixed cost volume variance.Indicate whether the variance is favorable (F) or unfavorable (U).(Round "Predetermined overhead rate" answer to 2 decimal places.Select "None" if there is no effect (i.e., zero variance).)

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e.	Predetermined overhead rate	perunit
f.	Fixedcost spending variance
g.	Fixedcost volume variance

18. To calculate budgeted direct labor costs, multiply thenumber of units to be produced by the number of projected directlabor hours. Next, multiply that total by the average direct costper hour.

True

False

22. A flexible budget summarizes revenues and costs for variouslevels of sales volume within a relevant range.

True

False

29. A cost variance measures the difference in quantities ofactual inputs used and the standard quantity of inputs allowed forthe actual number of units produced.

True

False

32. Unfavorable variances are subtracted from each other toarrive at a favorable variance.

True

False

34. A direct labor cost variance is unfavorable if the employerpays workers more per hour than budgeted.

True

False

36. In a standard cost system, the manufacturing overheadallocated to production equals the standard overhead allocationrate multiplied by the standard quantity of the allocation baseallowed for expected output.

True

False

37. The direct materials cost and efficiency variances make upthe total direct materials variance.

True

False

41. Which of the following statements is true of absorptioncosting?

A) It considers variable selling and administrative costs asproduct costs.

B) It considers fixed selling and administrative costs asproduct costs.

C) It considers fixed manufacturing overhead cost as productcosts.

D) It considers variable manufacturing overhead cost as periodcosts.

42) Which of the following is true of the traditional format ofthe income statement?

A) It is prepared under the variable costing method.

B) It shows contribution margin as a line item.

C) It is not allowed under GAAP.

D) It is prepared under the absorption method.

43) Unit product cost calculations using absorption costing donot include ________.

A) fixed manufacturing overhead

B) variable manufacturing overhead

C) variable selling and administrative costs

D) direct materials

85. Provide responses to the following questions regarding thediscount rate.

Question? Your response

What does the discount rate represent?

What are other names for the discount rate?

Is the following statement true? Discuss the reason for yourresponse. "The higher the risk, the lower the discount rate."

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ADM 3346 Chapter Notes - Chapter 8: Fixed Cost, Pro Rata, Radiance

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