DO IT!

REVIEW 12-14
(a)
TLV = (AH AR) (SHA SR)
TLV = (4,100 $14.40) ((2,000 2) $14.00) = $59,040 $56,000 = $3,040 U
Labour Price Variance

Direct Labour
(hours)

Actual
Hours
4,100

$59,040

Actual
Rate
$14.40

Actual
Hours
4,100

Standard
Rate

$14.00
$57,400

$1,640 U
Labour Quantity Variance

Direct Labour
(hours)

Standard
Actual
Quantity
Price

4,100
$14.00
$57,400

Standard Standard
Quantity
Price

4,000
$14.00

$56,000

$1,400 U
(b)
Total overhead variance = $81,300 $84,000* = $2,700 Favourable
*4,000 hours X $21.00

EXERCISE 12-28
(a) (1)
Total actual overhead cost

Overhead
Budgeted

Overhead
Budget
Variance

= ($16,000 + $11,500) +

$1,500

= $29,000
(2) Actual variable overhead cost= Actual Overhead Fixed Overhead
= $29,000 $12,000
= $17,000
(3) Variable overhead cost
applied

= 2,000 hours $8 = $16,000

(4) Fixed overhead cost applied = 2,000 hours $5 = $10,000

(5) Overhead volume variance

Normal

Fixed

Overhead X Capacity
Hours
Rate

$5

(2,300*

Standard

Hours
Allowed

2,000)

= $1,500 U
*$11,500 $5 per hour = 2,300 hours
(b)

Number of loans processed = Standard hours allowed

Standard hours per application
= 2,000 2
= 1,000 loans processed

PROBLEM 12-40A

(a)

Number of units = Total standard material cost standard cost/unit

Number of units = $405,000 $18.00 (6 kg $3 per kg) = 22,500

(b)

AQ = [(SQ SP) Quantity variance] SP

AQ = ($405,000 + $9,000) $3.00 per kg = 138,000 kilograms

(c)

AP = [(AQ SP) Price variance] AQ

AP = [(138,000 $3) $6,900] = $407,100 138,000 kg = $2.95/kg

(d)

AH = [(SH SR) Efficiency variance] SR

AH = ($90,000 + $7,000) $5.00/hr = 19,400 hours

(e)

AR = [(AH SP) Rate variance] AH

AP = [(19,400 $5) + $4,850] = $101,850 19,400 hr = $5.25/hr

(f)

Actual variable overhead cost = (AH VOH rate) Spending variance

Actual variable overhead cost = (19,400 $3) $1,300 = $56,900

(g)

Master Budgeted fixed cost = Flexible Budgeted fixed cost Volume

variance
Master Budgeted fixed cost = $126,000 + $14,000 = $140,000

(h)

Master budget hours = Budgeted fixed cost FOH rate

Master budget hours = $140,000 $7.00 = 20,000 hours

Note: This question might be less challenging if you use the matrix as
show on the next page. Start by filling in all the numbers you know, and
then break each one into its components using the information from the
standard cost card. This works well for materials and labour, but is less
effective for overhead variances.

PROBLEM 12-40A (Continued)

Materials Variance Matrix
(1)

(2)

(3)

Actual Quantity
Actual Price
138,000 $2.95 =
$407,100

Actual Quantity
Standard Price
138,000 $3 = $414,000

Standard Quantity
Standard Price
22,500 6 $3 =
$405,000

Price Variance
(1) (2)
$6,900 F

Quantity Variance
(2) (3)
$9,000 U

Total Variance
(1) (3)
$2,100 U

Labour Variance Matrix

(1)

(2)

(3)

Actual Hours
Actual Rate
19,400 $5.25 = $101,850

Actual Hours
Standard Rate
19,400 $5 = $97,000

Standard Hours
Standard Rate
22,500 0.8 $5 =
$90,000

Price Variance
(1) (2)
$4,850 U

Quantity Variance
(2) (3)
$7,000 U

Total Variance
(1) (3)
$11,850 U

PROBLEM 12-41A
(a) See below for the solution using formulas.
Material Variances
Price Variance
Quantity Variance
(AQ AP)
(AQ SP)
(SQA SP)
20,500 $4.90
20,500 $5.00
19,600 $5.00
$100,450
$102,500
$98,000
$2,050 F

$4,500 U

$2,450 U
Total Material Variance
Labour Variances
Price Variance
Quantity Variance
(AH AR)
(AH SR)
(SHA SR)
19,600 $12.20
19,600 $12.00
19,600 $12.00
$239,120
$235,200
$235,200
$3,920 U

$0

$3,920 U
Total Labour Variance
Actual per unit materials cost: $100,450 20,500 kg = $4.90/kg (AP)
Standard quantity of materials: 9,800 units 2 kg = 19,600 kg (SQ)
Actual per unit direct labour cost: $239,120 19,600 = $12.20 (AR)
Standard quantity of labour: 9,800 2 hours = 19,600 hours (SH)

Total materials variance = (AQAP) (SQSP)

(20,500 $4.90) (19,600 $5.00)
$100,450 $98,000 =

$2,450 U

Materials price variance = (AQAP) (AQSP)

(20,500 $4.90) (20,500 $5.00)
$100,450 $102,500 =
$2,050 F
Materials quantity variance = (AQSP) (SQ SP)
(20,500 $5.00) (19,600 $5.00)
$102,500 $98,000 =
$4,500 U
Total labour variance = (AHAR) (SHSR)
(19,600 $12.20) (19,600 $12.00)
$239,120 $235,200 =

$3,920 U

Labour price variance = (AHAR) (AHSR)

(19,600 $12.20) (19,600 $12.00)
$239,120 $235,200 =

$3,920 U

Labour quantity variance = (AHSR) (SHSR)

(19,600 $12.00) (19,600 $12.00)
$235,200 $235,200 =

(b) Total actual overhead: $78,100 + $59,200 = $137,300

Total variable applied overhead: 19,600 $4.00 = $78,400
Total fixed applied overhead: 19,600 $3.00 = $58,800
Total overhead variance = Actual Overhead Overhead Applied
$137,300 (19,600 $7.00)
$137,300 $137,200 =
$100 U
(c) Overhead budget variance = Actual O.H. Budgeted O.H.
($137,300) (19,600 $4.00) + (20,000 $3.00) =
$1,10
0

Overhead volume variance =

Fixed Overhead Rate (Normal capacity Standard Hours Allowed)
$3.00 (20,000 19,600) =
$1,200 U

PROBLEM 12-45A

(a)

Materials price variance = AQ (AP SP)

AQ ($0.99 $1.00) = 600
Actual quantity = $600 $0.01 = 60,000 litres

(b)

Materials quantity variance = SP (AQ SQ)

$1,600 = $1.00 [AQ (5,000 20)]
Actual quantity used = (5,000 20) + 1,600 = 101,600

(c)

Labour price variance = AH (AR SR)

$7,400 = AH ($10.50 $10.00)
Actual hours worked = $7,400 $0.50 = 14,800 hours

(d)

Labour quantity variance = SR (AH SH)

= $10.00 [14,800 (5,000 3)] = $2,000F

(e)

Variable overhead efficiency variance = Overhead rate (AH SH)

= [$(750,000 50,000) 3] (14,800 15,000)
= ($15.00 per unit 3 hours per unit) (200 hours)
= $5.00 (200) = $1,000 F

(f)

Actual variable overhead = (AH overhead rate) + unfavourable

spending variance
= (14,800 $5.00) + $1,800 = $75,800

(g)

Fixed overhead budget variance = actual overhead budgeted

overhead
= $88,000 ($1,050,000 12) = $88,000 $87,500 = $500 U

(h)

Fixed overhead volume variance = budgeted overhead (SH fixed

overhead rate)
= $87,500 [15,000 (($1,050,000 50,000) 3)]
= $87,500 (15,000 $7.00) = $17,500F

PROBLEM 12-48A

Budgeted fixed overhead is $135,000 0.20 = $27,000

Budgeted variable overhead is $135,000 0.80 = $108,000
The fixed overhead rate is $27,000 (9,000 2) = $1.50/hour
The variable overhead rate is $108,000 (9,000 2) = $6.00/hour
(a) Variable overhead spending variance =
Actual Overhead (Actual hours variable overhead rate)
= $108,500 (17,200 $6.00)
= $108,500 $103,200 = $5,300 U
(b)

Variable overhead efficiency variance = Variable overhead rate

(Actual hours Standard hours allowed)
= $6.00 [17,200 (8,500 2)] = $1,200 U

(c)

Fixed overhead budget variance = actual overhead budgeted

overhead
= $28,000 [(9,000 2) $1.50] = $28,000 $27,000 = $1,000 U

(d)

Fixed overhead volume variance = Fixed overhead rate

(Normal capacity Standard hours allowed)
= $1.50 [18,000 (8,500 2)] = $1,500 U

PROBLEM 12-54B

Red numbers are given in the problem;

Blue numbers are calculated.
1, 2, 3 etc
Chronological order for calculations (see below)
Material Price Variance
(AQ AP)
(AQ SP)
20,000 $0.60
20,000
$0.613
$12,0001
$12,2002
$200 F
Material Quantity Variance
(AQ SP)
(SQA SP)
15,000 $0.61
16,0006

$0.61
4
5
$9,150
$9,760
$610 F
Labour Variances
Price Variance
Quantity Variance
(AH AR)
(AH SR)
(SHA SR)
7,3001
2
7,5007 $4.80
7,500 $5.00
$5.00
8
$36,000
$37,500
$36,50011
$1,500 F9

$1,000 U10

$500 F
Total Labour Variance

PROBLEM 12-54B (Continued)

Variable Overhead Variances
Spending Variance
Efficiency Variance
(AH AR)
(AH PDOHR)
(SHA PDOHR)
Actual
7,500

$0.95
7,300
$0.95
$8,00017
$7,12514
$6,93513
$875 U16

$190 U15

$1,065 U
Total Variable Overhead Variance
Fixed Overhead Variances
Budget Variance
Volume Variance
Actual
Static budget
(SHA PDOHR)
10,000
$0.60
7,300
$0.60
22
19
18
$6,429
$6,000
$4,380
$429 U21

$1,620 U20

$2,049 U
Total Fixed Overhead Variance
Calculations:
Direct materials price variance (given)
Direct materials quantity variance (given)
Direct labour price variance:
7
$36,000 $4.80 = 7,500 hours
9
7,500 ($4.80 $5.00) =
Direct labour quantity variance:
Total variance price variance =
10
$500F $1,500F =
PROBLEM 12-54B (Continued)

$200 F
$610 F

$1,500 F

$1,000 U
$190 U

15

Variable overhead efficiency variance:

Because overhead is applied using direct labour hours, the standard
quantity for variable overhead efficiency variance will be the same as
for direct labour hours. The labour quantity variance is $1,000 and the
rate was $5.00 per hour; this represents 200 standard hours ($1,000
$5.00 per hour). The variable overhead efficiency variance = 200 hours
VOH rate. The VOH rate = $9,500 10,000 hours or $0.95 per direct
labour hour.

16

Variable overhead spending variance:

$875 U

Total variable overhead variance is represented by over- or underapplied overhead. Spending variance = under-applied overhead
variable overhead efficiency variance, or $1,065U $190U.
Fixed overhead volume variance:
Overhead rate = $1.55 $0.95 = $0.60
Actual quantity of hours = 7,500
Standard number of hours = 7,500 200
Normal capacity = 10,000
20
$0.60 (10,000 7,300) =
Fixed overhead budget variance:
21
($2,256 U $1,065 U) $1,620 U =
Total fixed overhead variance:
($1,620 U $492 F) =

$1,620 U
$429 F

$1,191 U