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Fundamentals of Variance Analysis

Fundamentals of Variance Analysis

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Fundamentals of Variance Analysis

Complete Exercise 16-28 and 16-32. Remember to complete all parts of the problems and report

the results of your analysis. Do not forget to show the necessary steps and explain how your

attained that outcome. Respond to at least two of your classmates' postings.

16-28. Variable Cost Variance

Sills Inc.

Required Compute the labor and variable overhead price and efficiency variances.

Labor:

a) Actual costs are $21.00 per hour ($546,000 actual direct labor / 26,000 hours); the actual cost

for 26,000 hours is $546,000 ($21.00 x 26,000 hours)

b) Actual inputs at standard price are $20.25 per hour ($546,000 actual costs - $19,500

unfavorable variance [given] = $526,500 / 26,000 actual hours worked.

c) Flexible production budget is found by multiplying the standard price of $20.25 per hour by

the standard labor-hours allowed of 27,000. 27,000 x $20.25 = $546,750

Actual Costs

Actual Inputs at

Standard Price

Flexible

Production Budget

$546,000 $526,500 $546,750

Labor price variance Efficiency variance

$546,000 - $526,500 = $526,500 - $546,750 =

$19,500 U $20,250 F

The labor price variance is unfavorable because direct labor costs were more than the standard

allowed; employees were paid $0.75 over the standard rate.

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The efficiency variance is favorable because the budgeted labor costs were more than the

standard allowed; management used their labor force efficiently.

Variable overhead:

Actual Costs

Actual Inputs at

Standard Price

Flexible

Production Budget

$132,600 $136,500

($5.25 x 26,000)

$141,750

($5.25 x 27,000)

Variable overhead price variance Variable overhead efficiency variance

$132,600 - $136,500 = $136,500 - $141,750 =

$3,900 F $5,250 F

16-32. Fixed Cost Variances

Carney Company:

Required What are the fixed overhead price and production volume variances?

a) b) c)

Actual Budget Applied

$385,500 $369,000 $360,000

Fixed overhead price variance Production volume variance

$385,500 - $369,000 $360,000 – $369,000

= $16,500 U = $9,000 U

$16,500 + $9,000

= $25,500 U total variance

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Fundamentals of Variance Analysis Complete Exercise 16-28 and 16-32. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates' postings. 16-28. Variable Cost Variance Sills Inc. Required Compute the labor and variable overhead price and efficiency variances. Labor: a) Actual costs are $21.00 per hour ($546,000 actual direct labor / 26,000 hours); the actual cost for 26,000 hours is $546,000 ($21.00 x 26,000 hours) b) ?Actual inputs at standard price are $20.25 per hour ($546,000 actual costs - $19,500 unfavorable variance [given] = $526,500 / 26,000 actual hours worked. c) Flexible production budget is found by multiplying the standard price of $20.25 per hour by the standard labor-hours allowed of 27,000. 27,000 x $20.25 = $54 ...
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