Sol. Ch. 8

Chapter 8
CHAPTER 8
Chapter 8
235
EXERCISES
E8-1
a.
Standard Cost Summary

Materials2 lbs. @ $8 ............................................
Labor1 hr. @ $10 .................................................
Factory overhead$4,000 1,000 units.................
$16
10
4
Standard unit cost....................................................
$30
Note: The standard cost is the same for E8-2 through E8-5.
b. Materials price variance = AQ (AP-SP)
= 2,000 ($8.50-$8.00)
= $1,000 unfav.
Materials quantity variance = SP (AQ-SQ)
= $8 [1,900 - (1,000 x 2)]
= $800 fav.
c.
Case 1
(1)
(2)
(3)
Case 2
(1)
(2)
(3)
d.
Work in Process (2,000$8) ..........................

Materials Price Variance (Unfavorable)
(2,000$0.50) ................................................
Materials (2,000$8.50) ...........................
16,000
Work in Process (1,000 hrs.$10) .................

Payroll ........................................................
10,000
Work in Process ..............................................

Factory Overhead ......................................
4,000
Work in Process ..............................................

Materials Quantity Variance (Favorable)
(100 $8). ..................................................
Materials (1,900 $8).................................
16,000
Work in Process ..............................................

Payroll ........................................................
10,000
Work in Process ..............................................

4,000
Cases 1 and 2
Finished Goods ...............................................
Work in Process .........................................
Note: This entry is the same for E8-2 and E8-3.
1,000
17,000
10,000
4,000
800
15,200
10,000
4,000
30,000
30,000
236
Chapter 8
E8-2
a.
Same as E8-1.
b.
Labor rate variance = AQ (AP SP)

= 1,000 ($10.20 - $10.00)
= $200 unfav.
Labor efficiency variance = SP (AQ SQ)
= $10 [ 900 (1000 x 1)]
= $1,000 fav.
c.
Case 1
(1)
(2)
(3)
Case 2
(1)
(2)
(3)
d.
Work in Process ..............................................

Materials ....................................................
16,000
Work in Process ..............................................

Labor Rate Variance (Unfavorable)
(1,000$0.20) ................................................
Payroll (1,000$10.20) .............................
10,000
Work in Process ..............................................

4,000
Work in Process ..............................................

Materials ....................................................
16,000
Work in Process ..............................................

Labor Efficiency Variance (Favorable)
(100$10) .................................................
Payroll (900$10) .....................................
10,000
Work in Process ..............................................

4,000
Same as E8-1
16,000
200
10,200
4,000
16,000
1,000
9,000
4,000
Chapter 8
237
E8-3
a.
Same as E8-1.
b.
Materials price variance = AQ (AP SP)

= 1,900 ($8.50 - $8.00)
= $950 unfav.
Materials quantity variance --- same as in E8-1 ($800 . fav)
Labor rate variance = AQ (AP SP)
= 900 ($10.20 - $10.00)
= $180 unfav.
Labor efficiency variance = same as in E8-2 ($1,000 fav.)
c.
(1)
(2)
(3)
Work in Process ..............................................

(1,950$0.50) ................................................
(100 $8) ...................................................
Materials (1,900$8.50) ...........................
16,000
Work in Process ..............................................

(900$0.20) ...................................................
(100$10) .................................................
Payroll (900$10.20) ................................
10,000
Work in Process ..............................................

4,000
d. Same as E8-1.
950
800
16,150
180
1,000
9,180
4,000
238
Chapter 8
E8-4
a.
Same as E8-1.
b.
Materials price variancesame as in E 8-3.

Materials quantity variance = SP (AQ SQ)
= $8 [1,900 (950 x 2)]
= $-0Labor rate variance --- same as in E8-3
= $10 [ 900 (950 x 1)]
= $500 fav.
c.
(1)
(2)
(3)
d.
Work in Process (950$16) ...........................

(1,900$0.50) ................................................
Materials (1,900$8.50) ...........................
15,200
Work in Process (950$10) ...........................

(900$0.20) ...................................................
(50$10) ...................................................
Payroll (900$10.20) ................................
9,500
Work in Process ..............................................

Factory Overhead (950$4) .....................
3,800
Finished Goods (950$30) ............................

Work in Process .........................................
28,500
950
16,150
180
500
9,180
3,800
28,500
Chapter 8
239
E8-5
a.
Same as E8-1.
b.
Materials price variance--- same as in E8-3.

Materials quantity variance = SP (AQ SQ)
= $8 [ 1,900 (1,050 x 2)]
= $1,600 fav.
Labor rate variance--- same as in E8-3.
= $10 [ 900 (1,050 x 1)]
= $1,500 fav.
c.
(1)
(2)
(3)
d.
Work in Process (1,050$16) ........................

(1,900$0.50) ................................................
(200$8) ...................................................
Materials (1,900$8.50) ...........................
16,800
Work in Process (1,050$10) ........................

(900$0.20) ...................................................
(150$10) .................................................
Payroll (900$10.20) ................................
10,500
Work in Process ..............................................

Factory Overhead (1,050$4) ..................
4,200
Finished Goods (1,050$30) .........................

Work in Process .........................................
31,500
950
1,600
16,150
180
1,500
9,180
4,200
31,500
240
Chapter 8
E8-6
1. Actual quantityactual price = total cost of purchases
200,000 $0.175 = $35,000
2. (Actual price Standard price) x Actual quantity purchased = Materials Pr. Var.
($.175 - $.17) x 200,000 = $1,000 unfav.
3. (Actual quantity standard quantity) x Standard price = Materials Qty. Var.
(185,000 170,000) x $.17 = $2,550 unfav.
4. Materials price variance +/- Materials quantity variance = Net materials variance
$1,000 unfav. + $2,550 unfav. = $3,550 unfav.
E8-7
Actual labor cost

31,110 hrs.$13.05* =
$405,985.50
Actual labor hours

standard rate per hour
Units producedstandard
labor hours per unit
standard rate per hour
31,110 hrs.$12.50 =
$388,875
6,1004.5 hrs.$12.50 =
$343,125
Labor Rate
Variance
1. $17,110.50 (unfav)
3.
* $405,985.50
Labor Efficiency
Variance
2. $45,750 (unfav)
Net Labor Variance

$62,860.50 (unfav)
31,110 hours = $13.05
Chapter 8
241
E8-8
1.
Standard Cost Summary
Materials1 lb. @ $4 per lb. ..........................................................................
Labor2 hrs. @ $9.00 per hr. .......................................................................
Factory overhead$10,000 10,000 units ...................................................
Standard cost per unit ....................................................................................
2.
(Actual price Standard price) Actual quantity = Materials price variance
($ 4.20* - $4.00) 9,400 = $1,880 (unfav)
(Actual quantity Standard quantity) Standard price = Materials quantity variance
(9,400 9,500) $4 = $400 (fav)
(Actual rate Standard rate) Actual hours = Labor rate variance
($8.90** - $9.00) 20,000 = $2,000 (fav)
(Actual hours Standard hours) Standard rate = Labor efficiency variance
(20,000 19,000) $9 = $9,000 (unfav)
*$39,480 9,400 pounds
**$178,000 20,000 hours
$ 4.00
18.00
1.00
$23.00
242
Chapter 8
E8-9
Case 1
Units produced
Standard hours per unit
Standard hours allowed
Standard rate per hour
Actual hours used
Actual labor cost
Labor rate variance
Labor efficiency variance
1,200
2
2,400
$5
2,340
$12,425
$725 U
$300 F
Case 2
2,000
0.6
1,200
$2
1,220
$2,730
$290 U
$40 U
Case 1
Standard hours allowed = 1,2002 = 2,400 hours
Actual Labor Cost
=
(Actual hours used x Standard rate per hour) +/- Labor rate variance
(2,340 x $5) + $725 = $12,425
Labor Efficiency Variance = SP (AQ SQ)
Labor Efficiency Variance = $5 (2,340 2,400) = $300 F
Case 2
Units produced = 1,200 0.6 = 2,000
Labor Efficiency Variance
$40
$40
$2
=
=
=
=
SP (AQ SQ)
SP (1,220 1,200)
20 SP
Standard rate per hour
Actual Labor Cost =

(Actual hours used x Standard rate per hour) +/- Labor rate variance
(1,220 x $2) + $290 = $2,730
Chapter 8
243
E8-10
1.
2.
Materials6 lbs. @ $2.00 per lb. ............................................

Labor2 hrs. @ $10 per hr.....................................................
Factory overhead$40,000 20,000 units ............................
$12.00
20.00
2.00
Standard cost per unit .............................................................
$34.00
Work in Process (18,000$12) ......................................

(105,000$0.04) ............................................................
(3,000$2)...............................................................
Materials (105,000$2.04) ......................................
216,000
Work in Process (18,000$20.00) .................................

(1,200$10) ............................................................
Labor Rate Variance (Favorable)
(34,800$0.50) ........................................................
Payroll (34,800$9.50) ............................................
360,000
4,200
6,000
214,200
12,000
17,400
330,600
E8-11
Work in Process (21,000$12) .............................................
Materials Quantity Variance (Unfavorable)
(4,000$2) ............................................................................
Materials Price Variance (Favorable)
(130,000$0.02) ............................................................
Materials (130,000$1.98).............................................
252,000
Work in Process (21,000$20) .............................................

(41,000$0.04) .....................................................................
(1,000$10) ........................................................ 10,000
Payroll (41,000 $10.04) ................................................
420,000
8,000
2,600
257,400
1,640
411,640
244
Chapter 8
E8-12
Conclusions to be drawn from the four variances:
Materials price varianceindicates that materials were purchased at a price above

standard.
Materials quantity varianceindicates fewer materials were used in the product

than called for by the standard.
Labor rate varianceindicates that the wage rate paid to production workers was
less than the standard.
Labor efficiency varianceindicates that less time was spent on production than
was called for by the standard.
E8-13
1.
Work in Process Mixing .......................................................
Work in Process Blending ...................................................
Materials Price Variance Mixing ..........................................
Materials Quantity Variance Mixing ..............................
Materials Price Variance Blending ...............................
Materials Quantity Variance Blending ..........................
Materials ........................................................................
185,000
130,000
10,000
2,000
4,000
2,000
317,000
2.
Labor Rate Variance Mixing ................................................
Labor Efficiency Variance Mixing .................................
Labor Rate Variance Blending .....................................
Labor Efficiency Variance Blending..............................
Payroll .............................................................................
110,000
95,000
10,000
3,000
8,000
7,000
197,000
3.
Factory Overhead...................................................................
Various Credits................................................................
145,000

Factory Overhead ...........................................................
85,000
70,000
145,000
155,000
Chapter 8
245
E8-13 Concluded
4.
Work in Process Mixing ................................................
380,000*
Finished Goods ......................................................................

Work in Process Blending ............................................
675,000**
380,000
675,000
*$185,000 + $110,000 + $85,000

**$380,000 + $130,000 + $95,000 + $70,000
E8-14
Calculation of factory overhead allowed:
Fixed overhead ...........................................

Variable overhead ($1.50 per unit) .............
Total ...........................................................
Standard
8,000
Units
$ 4,000*
12,000
$ 16,000
Month 1
7,200
Units
$ 4,000
10,800
$ 14,800
Month 2
8,400
Units
$ 4,000
12,600
$ 16,600
* $0.50 per unit x 8,000 standard units
Month 1
Month 2
Budget
Actual
Variance
Budget
Actual
Variance
$14,800
$14,500
$300 F
$16,600
$17,600
$1,000 U
246
Chapter 8
E8-15
a. and b.
Actual factory overhead
Fixed costs ...... $ 52,000
Variable costs .....
28,500
Standard hours standard rate
Budget based on standard hours

Fixed cost:
10,000 x $5.00 =
Variable cost:
9,000 $3.00 =
$ 80,500
Controllable Variance
(a) $3,500 (unfavorable)
9,000 units $8 /unit =

$50,000
27,000
$ 77,000
$ 72,000
Volume Variance
(b) $5,000 (unfavorable)
Net Factory Overhead Variance

$8,500 (unfavorable)
c.
Actual factory overhead (total) ........................................

Applied factory overhead (18,000 hours $4*) ...............
Underapplied factory overhead .......................................
Net variance:
Controllable variance (unfavorable) .............................
Volume variance (unfavorable) ....................................
Net variance (underapplied) ............................................
*$8 /unit 2 hrs/unit = $4 /hr
$ 80,500
72,000
$ 8,500
$ 3,500
5,000
$ 8,500
Chapter 8
247
E8-16
June 30 Work in Process ........................................................
Factory OverheadVolume Variance (Unfavorable)
Factory OverheadControllable Variance
(Favorable) ..........................................................
Factory Overhead ................................................
Calculation of the variances for June:
Budgeted overhead for
90% (18,000/20,000) of
Actual overhead
normal capacity
Fixed:
Variable:
(90% of $12,000)
$ 16,500
16,200
600
300
16,500
Applied overhead
$ 6,000
18,000 units $0.90* =
$ 16,200
10,800
$ 16,800
$300 (favorable)
Volume Variance
$600 (unfavorable)
*Calculation of standard overhead cost per unit:

Fixed overhead ............................................................
Variable overhead .......................................................
Total ............................................................................
Per unit ($18,000 20,000 units) .......................................
July 31 Work in Process ............................................................
Factory OverheadControllable Variance
(Unfavorable) ............................................................
Factory OverheadVolume Variance (Favorable)
Factory Overhead ................................................
$ 6,000
12,000
18,000
$ 0.90
18,900
400
300
19,000
Calculation of the variances for July:
Actual overhead
$ 19,000
Budgeted overhead for

105% (21,000/20,000)
of normal capacity
Fixed:
$ 6,000
Variable:
(105% of $12,000) 12,600
$ 18,600
$400 (unfavorable)
Applied overhead
21,000 units $0.90 =

$ 18,900
Volume Variance
$300 (favorable)
248
Chapter 8
E8-17
The usual formula for calculating variances is shown below. Each step in developing the
figures is numbered in order.
(1) Actual cost
(2) Budget for actual level
$27,000
$26,800
$200 (unfavorable)
1. Data given.
2. The unfavorable controllable variance of $200 indicates that actual cost was
$200 more than the budget for this level of production; therefore, budgeted cost
was $26,800 ($27,000 $200). (Note that you cannot use the budget formula
to compute the budgeted overhead because the actual level of production is not
given.)
Chapter 8
249
E8-18 (Appendix)
Computation of Budgeted Fixed Overhead:
Total budgeted overhead ................................................
Variable overhead (8,000 $2) .......................................
Budgeted fixed overhead ................................................
$20,000
16,000
$ 4,000
Variable Overhead Variances:

Actual hours
Actual variable overhead
$16,100
Actual hours
standard rate
7,640 hrs $2 =
$15,280
Spending Variance
$820 (unfavorable)

2,500 units 3 hrs $2 =
$15,000
Efficiency Variance
$280 (unfavorable)
Fixed Overhead Variances:

Actual fixed overhead
$3,920
Budgeted overhead
$4,000
Actual units
standard hours standard rate
2,500 units 3 hrs $0.50* =
$3,750
Budget Variance
Volume Variance
$80 (favorable)
$250 (unfavorable)
*[ $20,000 (8,000 x $2) = $4,000/ 8,000 hrs. = $.50 per direct labor hour
Net Factory Overhead Variance:
Spending .........................................................................
Efficiency .........................................................................
Budget ............................................................................
Volume ............................................................................
Net overhead variance ...........................................................
$ 820
280
80
250
$1,270
(unfavorable)
(unfavorable)
(favorable)
(unfavorable)
(unfavorable)
250
Chapter 8
E8-19 (Appendix)
a-c.
Actual
overhead
Fixed:
Var:
$52,000
28,500
$ 80,500
Budget based on
actual hours
Fixed: $52,000
Variable:
18,500 $1.50 =27,750
$79,750
Actual hours
standard rate
Standard hours
standard rate
18,500 $4*
9,000 units 2 hrs $4
$ 74,000
72,000
Budget Variance
Capacity Variance
Efficiency Variance
(a) $750 (unfav)
(b) $5,750 (unfav)
(c) $2,000 (unfav)
Net Factory Overhead Variance $8,500 (unfav)
*($5 + $3) 2 hours per unit = $4 per direct labor hour.
d.
Actual factory overhead ..................................................

Applied factory overhead (18,000 $4) ..........................
Underapplied factory overhead .......................................
$ 80,500
72,000
$ 8,500
Net variance:
Efficiency variance (unfavorable).................................
Capacity variance (unfavorable) ..................................
Budget variance (unfavorable).....................................
Net variance (underapplied) ............................................
$ 2,000
5,750
750
$ 8,500
Chapter 8
251
PROBLEMS
P8-1
(Actual price Standard price) Actual quantity = Materials price variance
($27.50 - $25.00) 5.5 = $13.75 (unfav)
(Actual quantity Standard quantity) Standard price = Materials qty. var
(5.5 -5.0) $25 = $12.50 (unfav)
(Actual rate Standard rate) Actual hours = Labor rate variance
($17.50 - $18.00) 80 = $40.00 (fav)
(Actual hours Standard hours) Standard rate = Labor efficiency variance
(80 60) $18 = $360 (unfav)
252
Chapter 8
P8-2
1-3. Materials:
Actual quantity
standard price
Actual cost
51,680$0.045 =
$2,325.60
51,680$0.05 =
$2,584.00
Materials Price
Variance
$258.40 (fav)
1.
3.
2.
Standard quantity
standard price
*6,400 units8$0.05 =
$2,560.00
Materials Quantity
Variance
$24 (unfav)
Net Materials Variance

$234.40 (fav)
*Equivalent Production:
Completed units ...................
In processAll materials .....
5,600
800
Total equivalent units ...........
6,400
4-6. Labor:
Actual hours
standard rate
Actual cost
38,000* hours$5.68 =
$215,840.00
4.
38,000 hours$5.60 =
$212,800.00
Labor Rate Variance

$3,040.00 (unfav)
6.
Standard hours
standard rate
6,240** units6$5.60 =
$209,664.00

5.
$3,136.00 (unfav)
Net Labor Variance

$6,176.00 (unfav)
*Actual hours = $215,840/$5.68 = 38,000 hours

**Equivalent ProductionLabor:
Units completed ...................
In process (80080%) ........
5,600
640
Total equivalent units ...........
6,240
253
P8-3
Standard
Quantity
or Hours
1. Materials quantity variance:
Stomp .........................................
Empty drums ..............................
3. Labor efficiency variance ..............
640,000 gal.*
80,000 drums
80,000 hrs.
Standard
Cost
Actual
Quantity
or Hours
645,000 gal.
80,000 drums
81,000 hrs.
Actual
Cost
2. Materials purchase price variance:

Stomp .........................................
$2.00/gal.
$1.90/gal.**
Empty drums ..............................

4. Labor rate variance .......................
$1.00/drum
$8.00/hr.
$1.00/drum
$8.08 hr.***
Difference
5,000 gal.
(unfav)
-01,000 hrs.
(unfav)
Difference
$0.10
(fav)
-0$0.08
(unfav)
Standard
Cost
$2.00/gal.
$1.00/drum
$8.00/hr.$
Actual
Quantity
or Hours
600,000 gal.
94,000 drums
81,000 hours
Chapter 8
Chapter 8
Variance
$10,000
(unfav)
-08,000
(unfav)
Variance
$60,000
(fav)
-0$ 6,480
(unfav)
*80,000 drums produced8 gallons per drum = 640,000 gallons

**1,140,000 600,000 = $1.90 per gallon
***654,480 81,000 hours = $8.08 per hour
253
254
Chapter 8
254
P8-4
Standard
Quantity
or Hours
Actual
Quantity
or Hours
1. Materials quantity variance ...........
5,000 lbs.
5,300 lbs.
8,000 hrs.
8,200 hrs.
Standard
Cost
2. Materials purchase price variance
$ 3.00/lb.
$10.00/hr.
Actual
Cost
$ 2.90/lb.
$9.80/hr.
Difference
300 lbs.
(unfav)
200 hrs.
(unfav)
Difference
$0.10
(fav)
$0.20
(fav)
Standard
Cost
$3.00/lb.
$10.00/hr.
Actual
Quantity
or Hours
5,200 lbs.
8,200 hrs.
Variance
$ 900
(unfav)
$2,000
(unfav)
Variance
$ 520
(fav)
$1,640
(fav)
Chapter 8
255
P8-5
Standard
Quantity
or Hours
1. Materials quantity variance
for Class . ...................................
80,000 ft.*
Actual
Quantity
or Hours
Difference
Standard
Cost
Variance
78,000 ft.
2,000 ft.
(fav)
$0.75/ft.
$1,500
(fav)
2,000 ft.
(unfav)
1,000 hrs.
(fav)
$ 1.00/ft.
$2,000
(unfav)
$8,000
(fav)
2. Materials quantity variance for

Chic ............................................
24,000 ft.**
26,000 ft.
32,000 hrs.***
31,000 hrs.
$8.00/hr.
Chapter 8
Chapter 8
*10 ft (8,000 units)

**3 ft (8,000 units)
***4 hours (8,000 units)
Standard
Cost
Actual
Cost
Difference
3. Materials purchase price

variance for Class ......................
$0.75/ft.
$0.72/ft.
$0.03
(fav)
4. Materials purchase price

variance for Chic ........................
$1.00/ft.
$1.05/ft.
$8.00/hr.
$7.80/hr.
$0.05
(unfav)
$0.20
(fav)
Actual
Quantity
or Hours
Variance
100,000 ft.
$3,000
(fav)
30,000 ft.
$1,500
(unfav)
$6,200
(fav)
31,000 hrs.
255
256
Chapter 8
P8-6
Materials quantity variance:
Standard
Quantity
Aluminum .......
Plastic.............
Actual
Quantity
1,700 *
8,500
1,900
9,500
Difference
Standard
Cost
per Pound
200 (unfav)
1,000 (unfav)
$0.40
$0.38
Variance
$ 80 (unfav)
$380 (unfav)
*8,500 units.2 lb per unit = 1,700 lbs
Materials purchase price variance:

Standard
Cost
per Pound
Aluminum .......
Plasticregular
grade ...........
Plasticlow
grade ...........
Actual
Cost
per Pound
Difference
Quantity
Purchased
Variance
$0.40
$0.48
$0.08 (unfav)
1,800
$144 (unfav)
$0.38
$0.50
$0.12 (unfav)
3,000
$360 (unfav)
$0.38
$0.29
$0.09 (fav)
6,000
$540 (fav)
Labor efficiency variance:

Standard
Cost
per Hour
Standard
Hours
Actual
Hours
Difference
2,550**
2,700
150 (unfav)
$8.00
Difference
Actual
Hours
$0.60 (unfav)
2,700
Variance
$1,200 (unfav)
**8,500 units.3 hrs per unit = 2,550
Labor rate variance:

Standard
Cost
per Hour
Actual
Cost
per Hour
$8.00
$8.60
Variance
$1,620 (unfav)
Chapter 8
257
P8-7
1.
2.
Equivalent production
Units
Materials:
Completed during the month.........................................................
Equivalent units in ending work in process (2,0001/2) ..............
9,000
1,000
Total ........................................................................................
10,000
Labor and overhead:

Completed during the month.........................................................
Equivalent units in ending work in process (2,0001/4) ..............
9,000
500
Total ........................................................................................
9,500
Liquid Lead:
Actual quantity
standard price
Actual cost
21,000 gal.$1.96 =
$41,160
Standard quantity
standard price
21,000 gal.$2.00 =
$42,000
Material Price
Variance
$840 (fav)
(10,000 units2 gal/unit)$2.00 =

$40,000
Material Quantity
Variance
$2,000 (unfav)
Net Liquid Lead Variance

$1,160 (unfav)
258
Chapter 8
P8-7 Continued
Varnish:
Actual quantity
standard price
Actual cost
20,000 gal. $3.00 =
$60,000
20,000 gal.$3.00 =
$60,000
Material Price
Variance
0
Standard quantity
standard price
(10,000 units2 gal/unit)$3.00 =
$60,000
Material Quantity
Variance
0
Labor:
Actual cost
10,000 hours$11.70 =
$117,000
Actual hours
standard rate
Standard hours
standard rate
10,000 hours$12.00 =
$120,000
(9,500 units1 hr/unit)$12.00 =

$114,000
Labor Rate Variance

$3,000 (fav)

$6,000 (unfav)
Net Labor Variance

$3,000 (unfav)
Chapter 8
259
P8-7 Concluded
3.
Ending Work in Process
2,000 units, one-half complete as to materials (2,0001/2$10) ...............

2,000 units, one-fourth complete as to labor (2,0001/4$12) ..................
$ 10,000
6,000
Materials and labor costs in work in process at end of month .......................
$ 16,000
4.
Cost of production for month (materials and labor):

Liquid Lead ................................................................. ......................
Varnish ....................................................................... ......................
Labor .......................................................................... ......................
$ 41,160
60,000
117,000
Total costs to be accounted for ............................. ......................
$ 218,160
Costs accounted for (materials and labor):

Transferred to finished goods (9,000$22) ...............
Ending work in process* .............................................
Net varianceLiquid Lead (unfavorable) ...................
Net varianceLabor (unfavorable) ............................
$198,000
16,000
$
1,160
3,000
Total costs accounted for ....................................

*$10.001,000 equivalent units .....................
$12.00 500 equivalent units .....................
$ 214,000
4,160
$ 218,160
$10,000
6,000
$ 16,000
P8-8
1.
Raw Materials Inventory (55,000$2.20) .......................

Materials Purchase Price Variance ($0.05*55,000) .....
Accounts Payable .......................................................
121,000
2,750
123,750
*$123,750/55,000 = $2.25; $2.25 $2.20 = $0.05
2.
Work in Process (8,8005.5 lbs.$2.20) ......................

Materials Quantity Variance [(54,305 48,400)$2.20]
Raw Materials Inventory (54,305 $2.20) ..................
106,480
12,991
Work in Process (8,8001.8 hours$6.25) ..................

Labor Efficiency Variance (2,360 hours*$6.25) ...........
Labor Rate Variance (18,200$.75)** ...........................
Payroll ........................................................................
99,000
14,750
13,650
*18,200 (8,8001.8 hrs.) = 2,360 hrs.

**($127,400 18,200) $6.25 = $.75 hr.
119,471
127,400
260
Chapter 8
P8-9
1.
2.
3.
Direct materials cost in finished goods inventory ................

Direct materials cost in cost of goods sold ..........................
Total ....................................................................................
$ 87,000
348,000
$ 435,000
20%
80
100%
Materials price variance ......................................................

Ratio of direct materials cost in finished goods inventory ....
Amount to be prorated to finished goods inventory .............
$ 10,000
20%
$ 2,000
Materials price variance ......................................................

Materials quantity variance..................................................
$ (10,000)
15,000
(unfav)
(fav)
Net materials cost variance .................................................

Ratio of direct materials cost in finished goods inventory ....
5,000
20%
(fav)
Net variance prorated to finished goods inventory ..............

Direct materials cost in finished goods inventory before
variances are prorated ......................................................
1,000
(Cr.)
87,000
(Dr.)
Total amount of direct materials cost in finished goods

inventory ...........................................................................
$ 86,000
Direct labor cost in finished goods inventory .......................

Direct labor cost in cost of goods sold .................................
Total ....................................................................................
$ 130,500
739,500
$ 870,000
15%
85
100%
Labor rate variance .............................................................

Labor efficiency variance ....................................................
$ (20,000)
5,000
(unfav)
(fav)
Net labor cost variance .......................................................

Ratio of direct labor cost in finished goods inventory ..........
$ (15,000)
15%
(unfav)
Net variance prorated to finished goods inventory ..............

Direct labor cost in finished goods inventory before
variances are prorated ......................................................
2,250
(Dr.)
130,500
(Dr.)
Total amount of direct labor cost in finished goods

inventory ...........................................................................
$ 132,750
Chapter 8
261
P8-9 Concluded
4.
Beginning balance of cost of goods sold:

Direct materials ..................................
Direct labor .........................................
Applied manufacturing overhead ........
Net materials cost variance .....................
Ratio of direct materials cost in cost
of goods sold ........................................
$348,000
739,500
591,600
$
5,000
$1,679,100
(Dr.)
4,000
(Cr.)
12,750
$ 1,687,850
(Dr.)
(Dr.)
(Cr.)
80%
Materials cost variances prorated to

cost of goods sold .................................
Net labor cost variance ...........................
Ratio of direct labor cost in cost
of goods sold ........................................
$ 15,000
(Dr.)
85%
Labor cost variance prorated to cost of

goods sold ............................................
Total cost of goods sold ..........................
Note: There is no overhead variance.
P8-10
1. Standard quantity of materials allowed:
Actual production .........................................................
Standard materials per unit .........................................
Standard quantity of materials allowed .......................
4,000 units
5 pounds
20,000 pounds
2. Actual quantity of materials used:

Standard quantity ..............................................................
Add unfavorable (debit) materials quantity
variance standard price per lb. ($1,000 $1 per lb.) ..
Actual quantity of materials used .......................................
3.
Standard direct labor hours allowed:

Actual production ...............................................................
Standard hours per unit .....................................................
Standard hours allowed .....................................................
20,000 pounds
1,000
21,000 pounds
4,000 units
1
4,000
262
Chapter 8
P8-10 Concluded
4.
5.
6.
Actual direct labor hours worked:

Standard hours allowed .....................................................
Less favorable (credit) direct labor efficiency
variance standard rate ($1,200 $8/hr) .....................
Actual hours worked ..........................................................
Actual direct labor rate:
Standard direct labor rate ..................................................
Add unfavorable (debit) direct labor rate
variance actual hours worked ($770 3,850 hrs) .......
Actual direct labor rate .......................................................
Actual total overhead:
Standard overhead (4,000 units produced $4
standard overhead rate per unit) ...................................
Unfavorable (debit) overhead variance..............................
Actual total overhead .........................................................
4,000
(150)
3,850
$ 8.00
.20
$ 8.20
$ 16,000
500
$ 16,500
P8-11
FACTORY OVERHEAD VARIANCES
Actual factory
overhead
2,500 units 4 hrs =
$30,305
Units produced standard

quantity standard rate
Budget at standard hours

allowed
10,000
10,000 hrs $1.00 = $ 10,000

Fixed cost
= 20,000
Budget at standard hrs $ 30,000
$305 (unfavorable)
2,500 units 4 $3.38
$33,800
Volume Variance
$3,800 (favorable)
Chapter 8
263
P8-12
1.
Work in Process Mixing (1,100 eq. units $4) ...................

Work in Process Blending (950 eq. units $2) ....................
Factory Overhead (indirect materials) ($1,000 + $500) ...........
Materials Quantity Variance Mixing .....................................
Materials Price Variance Mixing ..........................................
Materials Quantity Variance Blending. .............................
Materials Price Variance Blending ...................................
Materials ($4,715 + $1,813 + $1,000 + $500)......................
4,400
1,900
1,500
200*
115*
Work in Process Mixing (1,100 eq. units $10) ..................

Factory Overhead (indirect labor) ($1,300 + $1,000) ..............
Labor Rate Variance Mixing ................................................
Labor Efficiency Variance Blending .....................................
Labor Efficiency Variance Mixing .....................................
Labor Rate Variance Blending .........................................
Payroll ($10,965 + $5,900 + $1,300 + $1,000) ....................
11,000
5,700
2,300
215*
300**
Work in ProcessMixing (1,100 eq. units $6) .....................

Factory Overhead, Controllable Variance Mixing ................
Factory Overhead, Volume Variance Blending ....................
Factory Overhead, Volume Variance Mixing ....................
Factory Overhead, Controllable Variance Blending. ........
Factory Overhead Mixing .................................................
Factory Overhead Blending .............................................
6,600
3,800
500**
50**
Factory Overhead ($4,400 + $2,250) ......................................

Various credits .....................................................................
6,650
Factory Overhead Mixing.....................................................

Factory Overhead Blending .................................................
Factory Overhead ................................................................
6,700
3,750
50*
37*
8,028
250*
100**
19,165
400**
100**
6,700
3,750
6,650
10,450
*See page 262

**See page 263
Work in Process Blending (1,000 units $20) .....................

Work in Process Mixing....................................................
20,000
Finished Goods (900 units $32) ...........................................

Work in ProcessDept. Blending .......................................
28,800
Accounts Receivable (850 units $50) ...................................

Sales ...................................................................................
Cost of Goods Sold (850 units $32) .....................................
Finished Goods ...................................................................
42,500
20,000
28,800
42,500
27,200
27,200
264
Chapter 8
P8-12 Continued
Variances are calculated as follows:
Materials
Mixing
Actual cost
2,300 lbs. $2.05 =
$4,715
Actual quantity standard price

2,300 lbs. $2.00 =
$4,600
Materials Price Variance

$115 (unfavorable)
Standard cost
2,200 lbs. $2.00 =
$ 4,400
Materials Quantity Variance

$200 (unfavorable)

$315 (unfavorable)
Blending
Actual cost
1,850 lbs. $0.98 =
$1,813
Actual quantity standard price

1,850 lbs. $1.00 =
$1,850

$37 (favorable)
Standard cost
1,900 lbs. $1.00 =
$1,900

$50 (favorable)

$87 (favorable)
Labor
Mixing
Actual cost
Actual hours standard price
2,150 hrs $5.10 =

$10,965
2,150 hrs $5.00 =

$10,750
Labor Rate Variance

$215 (unfavorable)
Net Labor Variance
$35 (favorable)
Standard cost
2,200 hrs $5.00 =
$11,000

$250 (favorable)
Chapter 8
265
P8-12 Continued
Blending
Actual cost
Actual hours standard rate
Standard cost
1,000 hours $5.90 =

$5,900
1,000 hours $6.00 =

$6,000
950 hours $6.00 =

$5,700
Labor Rate Variance

$100 (favorable)

$300 (unfavorable)
Net Labor Variance

$200 (unfavorable)
Factory Overhead
Mixing
Actual overhead
$6,700

Fixed: 2,000 hrs $2 = $ 4,000
Var: 2,200 hrs $1 = 2,200
$ 6,200
$500 (unfavorable)
Standard cost
2,200 hrs $3.00 =
$ 6,600
Volume Variance
$400 (favorable)

$100 (unfavorable)
Blending
Actual overhead
$3,750
Standard cost
Fixed: 1,000 hrs $1 = $ 1,000

Var:
950 hrs $3 = 2,850
$ 3,850
$100 (favorable)
950 hrs $4.00 =

$ 3,800
Volume Variance
$50 (unfavorable)

$50 (favorable)
266
Chapter 8
P8-12 Concluded
2.
Mixing 200 units, one-half completed)

Materials (200 1/2 $4) ..................................................................
Labor (200 1/2 $10) .....................................................................
Factory overhead (200 1/2 $6) ....................................................
Work in processMixing..............................................................
Blending (100 units, one-half completed)
Cost from Mixing (100 $20) ..............................................
Cost in Blending:
Materials (100 1/2 $2) ................................................
Labor (100 1/2 $6) .....................................................
Factory overhead (100 1/2 $4) ..................................
Work in processBlending .........................................
3.
400
1,000
600
$ 2,000
$ 2,000
100
300
200
600
$ 2,600
Costs to be accounted for:

Material I ............................................................................................
Material II ...........................................................................................
LaborMixing ...................................................................................
LaborBlending ................................................................................
Factory overheadMixing .................................................................
Factory overheadBlending .............................................................
Total ..............................................................................................
$ 4,715
1,813
10,965
5,900
6,700
3,750
$33,843
Costs accounted for:

Transferred to finished goods (900 units $32) ................................
Work in processMixing ...................................................................
Work in processBlending ...............................................................
Net unfavorable variance ...................................................................
Total ..............................................................................................
$28,800
2,000
2,600
443
$33,843
Chapter 8
267
P8-13
1.
Standard Cost of Production for October

QuantityStandard Cost
Total
Lot
(Dozens)per Dozen
Standard Cost
30
1,000
$41.25
31
1,700
41.25
32
1,200
35.64*
Standard cost of production ............................................................
$ 41,250
70,125
42,768
$154,143
*Standard materials cost plus 80% complete as to standard cost of labor and overhead: $13.20 + (80%
$28.05)
2.
Schedule Computing Materials Price Variance
Actual cost of materials purchased ........................................................

Standard cost of materials purchased (95,000 $0.55) .........................
Materials price variance (unfavorable) ...................................................
3.
$ 53,200
52,250
$
950
Schedule of Materials and Labor Variances for October
a. Materials quantity variance

Standard yards:
Dozens in lot .................................
Standard yards per dozen .............
Total standard quantity .............
Actual yards used .............................
Variance in yards ..............................
Lot 30
Lot 31
Lot 32
Total
1,000
24
24,000
24,100
(100)
1,700
24
40,800
40,440
360
1,200
24
28,800
28,825
(25)
3,900
24
93,600
93,365
235
268
Chapter 8
P8-13 Concluded
b. Labor efficiency variance
Standard hours:
Dozens in lot .................................
Standard hours per dozen ............
1,000
3
1,700
3
1,200
3
3,000
100%
5,100
100%
3,600
80%
Total standard hours .................

Actual hours worked .........................
3,000
2,980
5,100
5,130
2,880
2,890
Variance in hours ..............................
20
Total standard quantity .............

Percentage of completion .............
(30)
(10)
10,980
11,000
(20)
( ) indicates unfavorable variance

c. Labor rate variance
Lot 30
Lot 31
Lot 32
Total
Actual hours worked .........................

2,980
5,130
2,890
11,000
Rate paid in excess of standard
($7.40 $7.35) ............................. $ 0.05 $ 0.05 $ 0.05 $ 0.05
Labor rate variance (unfavorable) ..... ($ 149.00) ($ 256.50) ($ 144.50) ($ 550.00)
4.
Schedule of Overhead Variances for October
Controllable variance
Actual overhead ...................................................................
Budgeted overhead for level of production attained:
Fixed overhead (.40 $288,000/12)............................... $9,600
Variable overhead ($2 .60 10,980 standard hours) .. 13,176
Total budgeted overhead ..........................................
Controllable variance (unfavorable) .....................................
$ 22,800
22,776
($
24)
Volume variance
Budgeted overhead for level of production attained .............
Overhead applied to production
(10,980 standard hours $2) ...............................................
Volume variance (unfavorable) ............................................
$ 22,776
21,960
($ 816)
Chapter 8
269
P8-14
MATERIALS VARIANCES
Actual cost
Actual gal. standard price
40,743 gal. $0.38* =
40,743 gal. ($32/80 gal.) =
$15,482.34
Standard
gallons standard price
503 batches x $32 =
$16,297.20

$814.86 (favorable)
$16,096.00

$201.20 (unfavorable)

$613.66 (favorable)
*Actual materials cost $15,482.34 40,743 gallons = $0.38 per gallon.
LABOR VARIANCES
Actual cost
29,677 hrs $3.65 =
$108,321.05

29,677 hrs $216/60 =
29,677 $3.60 =
$106,837.20
Labor Rate Variance

$1,483.85 (unfavorable)
Standard
hours standard rate
503 batches $216 =
$108,648.00

$1,810.80 (favorable)
Net Labor Variance
$326.95 (favorable)
270
Chapter 8
P8-14 Concluded
Actual factory
overhead
Budgeted overhead
at standard hours
Standard
hours standard rate
Variable + Fixed Var. = 30,180 hrs* $2.20** = $ 66,396

$67,080 + $60,500 =
Fixed cost =....................... 60,000
$127,580
Budget at standard hrs
$126,396
30,180 $4.20 =
$126,756
Volume Variance
$360.00 (favorable)
Net factory overhead variance

*503 batches 60 hours = 30,180 hours

**Variable overhead rates:
Per hour
Total overhead rate .................... $4.20
Less:
$60,000 fixed overhead
= 2.00
30,000 budgeted hours * * *
Variable overhead rate ........
$2.20
***500 batches 60 hours = 30,000 budgeted hours
($252 60 hours)
fixed overhead rate
Chapter 8
271
P8-15 (Appendix)
1. Factory OverheadVariable Costs:
Actual variable cost
Standard hrs standard rate
18,375 hrs $2 =
$36,750
$33,710
Spending Variance
$3,040 (favorable)
3,500 units 5 hrs $2 =

$35,000
Efficiency Variance
Factory OverheadFixed Cost:

Actual cost
$61,950
Budgeted fixed cost

$60,000
Budget Variance
2.

3,500 units 5 hrs $4 =
$70,000
Volume Variance
$10,000 (favorable)

Spending ..................................................................... $ 3,040 (favorable)
Efficiency .....................................................................
1,750 (unfavorable)
Budget .........................................................................
1,950 (unfavorable)
Volume ........................................................................
10,000 (favorable)
Net factory overhead variance ............................... $ 9,340 (favorable)
Since the net variance is favorable, it represents overapplied factory overhead.
272
Chapter 8
P8-16 (Appendix)
1.
MATERIAL VARIANCES
Actual cost
1,800 4 = 7,200 parts

7,200 108% = 7,776 parts
$2.00/4 parts = $0.50 each
$0.50 105% = $0.525 cost
7,776 $0.525 =
$4,082.40
Actual parts
standard price
7,776 $0.50 =

parts standard price
1,800 4 = 7,200 parts
7,200 $0.50 =
$3,888.00
Materials Price
Variance
$3,600.00
Materials Quantity
Variance

LABOR VARIANCES
Actual cost
1,800 units 2 hrs = 3,600
3,600 106% = 3,816 act. hrs
3,816 $3.30 (110% $3) =
$12,592.80
Actual hours
standard rate

hours standard rate
3,816 $3 =
1,800 2 hrs = 3,600

3,600 $3 =
$11,448
Labor Rate
Variance
$10,800
Labor Efficiency
Variance
Net Labor Variance

Chapter 8
273
P8-16 Concluded
2. Factory Overhead
$4,000 fixed cost

$4,000
=
2,000 units 2 hours
4,000 hours
$3
Variable rate =
= $1.50 per hour
2 hours
Fixed rate =
= $1.00 per hour
Factory OverheadVariable Cost

Actual variable cost
$4,800
Actual hrs standard rate

3,816 hrs $1.50 =
$5,724
Spending Variance
$924 (favorable)

3,600 hrs $1.50 =
$5,400
Efficiency Variance
$324 (unfavorable)
Budget VarianceFixed Cost

Budgeted fixed cost
$4,100
Budget Variance
$100 (unfavorable)
$4,000

3,600 hrs $1.00 =
$3,600
Volume Variance
$400 (unfavorable)

Spending variance ........................................................
Efficiency variance ........................................................
Budget variance ............................................................
Volume variance ...........................................................
Net factory overhead variance ...................................
$924
324
100
400
(favorable)
(unfavorable)
(unfavorable)
(unfavorable)
$100 (favorable)
274
Chapter 8
P8-17 (Appendix)
Budgeted hours = 500 units 26 hours = 13,000 hours
$44,200
Variable overhead rate =
= $3.40 per hour
13,000 hours
$50,050
Fixed overhead rate =
= $3.85 per hour
13,000 hours
Standard hours allowed = 510 units 26 hours = 13,260 standard hours
Factory OverheadVariable Costs:
Actual variable costs
$45,009

13,015 hrs $3.40 =
$44,251
Spending Variance
$758 (unfavorable)

13,260 hrs $3.40 =
$45,084
Efficiency Variance
$833 (favorable)
Factory OverheadFixed Costs:

Budgeted fixed cost
$50,125
Budget Variance
$75 (unfavorable)
$50,050

13,260 hrs $3.85 =
$51,051
Volume Variance
$1,001 (favorable)

Spending .......................................................................
Efficiency .......................................................................
Budget ..........................................................................
Volume ..........................................................................
Net overhead variance ..............................................
Proof:
Applied overhead (13,260 hrs $7.25) ................................
Actual total overhead ($45,009 + $50,125) ..........................
Overapplied factory overhead .......................................
758
833
75
1,001
$ 1,001
(unfavorable)
(favorable)
(unfavorable)
(favorable)
(favorable)
$ 96,135
95,134
$ 1,001 (favorable)
Chapter 8
275
P8-17 Concluded
Labor Variances:
Actual labor cost
13,015 hrs $5.00 =

$65,075.00
13,260 hrs $5.00 =

$66,300.00
13,015 hrs $5.08 =

$66,116.20
Labor Rate Variance


$1,225.00 (favorable)
Net Labor Variance
$183.80 (favorable)
P8-18 (Appendix)
Mixing:
Actual
overhead
Actual hours
standard rate
Budgeted overhead
Fixed:
Variable:
2,150 hrs $1 =
$6,700
$ 4,000
2,150 hrs $3 =
2,150
$ 6,150
$6,450
Budget Variance
$550 (unfavorable)
Capacity Var.
$300 (favorable)
Applied
overhead
2,200 hrs $3 =
$6,600
Efficiency Var.
$150 (favorable)

$100 (unfavorable)
Blending:
Actual
overhead
Budgeted overhead
Fixed:
Variable:
1,000 hrs $3 =
$3,750
Budget Variance
$250 (favorable)
Actual hours
standard rate
Applied
overhead
$1,000
1,000 hrs $4 =
3,000
$ 4,000
$4,000
Capacity Var.
$0

$50 (favorable)
950 hrs $4 =
$3,800
Efficiency Var.
$200 (unfavorable)
276
Chapter 8
P8-19 (Appendix)
Schedule of Variances from Standard Cost for December
Three-Variance Method
Favorable variances:
Materials price [110 ft. ($0.15 $0.12) 1,200 units] ........ $ 3,960
Capacity [(5,100 hrs* $4.50**) $21,300***] ......................
1,650
Overhead budget ($21,300 $21,120) .................................
180
Total favorable variances ..................................................
Unfavorable variances:
Materials quantity [$0.15 (110 ft. 100 ft.) 1,200 units]... $ 1,800
Labor rate [4 1/4 hrs ($10.24 $10.00) 1,200 units] .......
1,224
Labor efficiency [$10.00 (4 1/4 4) 1,200 units] .............
3,000
Overhead efficiency [$4.50 (4 1/4 4) 1,200 units] .........
1,350
Total unfavorable variances...............................................
Net variance (unfavorable) ............................................
Proof of computation:
Total standard cost of 1,200 units $73.00 .................................................
Total actual cost of 1,200 units $74.32 ......................................................
Total variance........................................................................................
5,790
7,374
1,584
$ 87,600
89,184
$ 1,584
* Actual labor hours1,200 units 4 1/4 hrs = 5,100 hrs

** Overhead application rate$10 45% = $4.50 per direct labor hour
*** Computation of overhead budget at 5,100 hours:
Actual hours worked4 1/4 per unit 1,200 units .......................................

Fixed overhead15/45 of estimated overhead at normal capacity
(15/45 $18,000) ..................................................................................
Variable overhead30% $10.00, or $3.00 per hour
(5,100 hours $3.00) ............................................................................
Budget at 5,100 hours ..................................................................................
or
Budget at 5,200 hours ..................................................................................
Budget at 4,800 hours ..................................................................................
5,100
$
6,000
15,300
$ 21,300
$ 21,600
20,400
Difference ..............................................................................................
$ 1,200
Range between hour levels ..........................................................................
400 hrs
Dividing the difference of $1,200 by 400 hours determines an additional cost of $3.00 for each
one-hour increase in the budget.
Budget at 4,800 hours ..................................................................................
Add increase in budgeted cost necessary to attain 5,100 hour level
($3.00 300 hours) ...............................................................................
Budget at 5,100 hours ..................................................................................
$ 20,400
900
$ 21,300
Chapter 8
revenues in 2004 versus 10.9% in 2005.
277

Sol. Ch. 8

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sol. Ch. 8

Uploaded by

Copyright:

Available Formats

Chapter 8

Standard Cost Summary

Standard unit cost....................................................

Work in Process (2,000$8) ..........................

Work in Process (1,000 hrs.$10) .................

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Labor rate variance = AQ (AP SP)

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Materials price variance = AQ (AP SP)

Work in Process ..............................................

Work in Process ..............................................

Work in Process ..............................................

Materials price variancesame as in E 8-3.

Work in Process (950$16) ...........................

Work in Process (950$10) ...........................

Work in Process ..............................................

Finished Goods (950$30) ............................

Materials price variance--- same as in E8-3.

Work in Process (1,050$16) ........................

Work in Process (1,050$10) ........................

Work in Process ..............................................

Finished Goods (1,050$30) .........................

Actual labor cost

Actual labor hours

Net Labor Variance

31,110 hours = $13.05

Actual Labor Cost =

Materials6 lbs. @ $2.00 per lb. ............................................

Standard cost per unit .............................................................

Work in Process (18,000$12) ......................................

Work in Process (18,000$20.00) .................................

Work in Process (21,000$20) .............................................

Materials price varianceindicates that materials were purchased at a price above

Materials quantity varianceindicates fewer materials were used in the product

Work in Process Mixing .......................................................

Finished Goods ......................................................................

*$185,000 + $110,000 + $85,000

Fixed overhead ...........................................

* $0.50 per unit x 8,000 standard units

Standard hours standard rate

Budget based on standard hours

9,000 units $8 /unit =

Net Factory Overhead Variance

Actual factory overhead (total) ........................................

*Calculation of standard overhead cost per unit:

Calculation of the variances for July:

Budgeted overhead for

21,000 units $0.90 =

(2) Budget for actual level

Variable Overhead Variances:

Standard hours standard rate

Fixed Overhead Variances:

9,000 units 2 hrs $4

Actual factory overhead ..................................................

Net Materials Variance