Question

11. The following information is available for Fletcher, Inc. Description DM Cost DM Quantity DL Rate DL Hours Variable OH Rate Variable OH Quantity Fixed OH Cost (based on units) Quantity Standard $2/lb. 6 lbs. per unit $12.75/hour 2 hours/unit Actual $483,570 243,000 lbs. $1,100,250 81,500 hours $1,140,000 2 hours per unit $336,000 budgeted 42,000 units capacity $3338,000 40,000 units ف نه و شه نه DM Cost Variance: DM Price Variance: DM Quantity Variance: DL Cost Variance: DL Rate Variance: DL Efficiency Variance: Variable OH Cost Variance: Variable OH Spending Variance: Variable OH Efficiency Variance: Fixed OH Cost Variance: Fixed OH Budget Variance: Fixed OH Volume Variance: فه نه د.

Answer 1

Solution :

a) . DM cost variance = SQ X SP - AQ X AP

= 2,40,000 X $ 2 - $ 4,83,570

= $ 4,80,000 - $ 4,83,570

= $ 83,570 (A)

SQ = 6 ib X 40000 units = 240000 ib

SQ = Standard quantity allowed

SP = Standard price p. u.

AQ = Actual quantity used

AP = Actual Price p. u.

The result is adverse because, actual cost is more than standard cost.

b) . DM Price Variance = SP X AQ - AP X AQ

= $2 X 2,43,000 - $ 4,83,570

= $ 4,86,000 - $ 4,83,570

= $ 2,430 ( F)

The result is favourable because, actual price is less than standard price.

c). DM Quantity Variance = SQ X SP - AQ X SP

= 2,40,000 X $ 2 - 2,43,000 X $ 2

= $ 4,80,000 - $ 4,86,000

= $ 6,000 (A)

d). DL cost variance = SH X SR - AH X AR

= 80000 X $ 12.75 - $ 11,00,250

= $ 10,20,000 - $ 11,00,250

= $ 80,250 ( A)

e). DL rate variance = AH X SR - AH X AR

= 81,500 X $ 12.75 - $ 11,00,250

= $ 10,39,125 - $ 11,00,250

= $ 61,125 ( A)

f). DL efficiency variance = SH X SR - AH X SR

= 80,000 X $ 12.75 - 81,500 X $ 12.75

= $ 19,125 ( A)

SH = 2 hr p. u. X 40,000 units = 80,000 hrs.

SH = Standard hours

AH = Actual hours

SR = Standard rate / hr

AR = Actual rate / hr

g) . Variable OH cost variance = Standard variable overhead for actual production - Actual variable overhead

= $ 11,44,000 - $ 11,40,000

= $ 4,000 ( F)

Standard variable overhead for actual production = $ 14.30 X 2h.x 40,000 units = $ 11,44,000

h) . Variable OH Spending variance = Standard variable overhead rate X Actual time - Actual variable overhead

= $ 14.30 X 81500 - $ 11,40,000

= $ 11,65,450 - $ 11,40,000

= $ 25,450 (F)

i) . Variable overhead efficiency variance = Standard variable overhead for actual hrs - Standard variable overhead for for actual output

= $ 14.30 X 81,500 hrs - $ 14.30 X 80,000

= $ 21,450 ( F)

j) . Fixed OH cost variance = Standard fixed overhead for actual output - Actual fixed overhead

= $ 8 X 40,000 units - $ 3,38,000

= $ 3,20,000 - $ 3,38,000

= $ 18,000 ( A)

Standard fixed overhead rate = Budgeted fixed OH / Budgeted. Qty.

= $ 3,36,000 / 42,000 = $ 8

k) . Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead

= $ 3,36,000 - $ 3,38,000

= $ 2,000 (A)

l ). Fixed overhead volume variance = Budgeted fixed overhead - Standard fixed overhead for actual output

= $ 3,36,000 - $ 3,20,000

= $ 16,000 ( F)