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Chapter 23: Q12RQ (page 1305)
Question:List the direct materials variances, and briefly describe each.
Answer
The direct material variances can be in the form of direct material cost variance and direct material efficiency variance
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Preparing a flexible budget and performance report
This continues the Piedmont Computer Company situation from Chapter 22. Assume Piedmont Computer Company has created a standard cost card for the PCC model tablet computer, with overhead allocated based on direct labor hours:
Direct materials | \( 300 per tablet |
Direct labor | 3 hours per tablet at \)26 per hour |
Variable overhead | 3 hours per tablet at \(5 per hour |
Fixed overhead | \)54,000 per month |
During the month of September, Piedmont Computer Company incurred the following costs while manufacturing 1,100 PCC model tablets:
Direct material | \(341,000 |
Direct labor | 88,000 |
Variable overhead | 17,600 |
Fixed overhead | 56,320 |
Requirements
1. Prepare a flexible budget for September for 900, 1,000, and 1,100 PCC model tablets. The tablet has a standard sales price of \)675. List variable costs separately.
2. Using 1,000 PCC model tablets for the static budget, prepare a flexible budget performance report for September. Total sales revenue for the month was $767,800. The company sold 1,100 tablets.
3. What insights can the management of Piedmont Computer Company draw from the performance report?
Question:What is a standard cost system?
Computing overhead variances
Refer to the Morgan, Inc. data in Short Exercise S239. Last month, Morgan reported the following actual results: actual variable overhead, \(10,800; actual fixed overhead, \)2,770; actual production of 7,000 units at 0.20 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units).
Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
Question:How is the fixed overhead volume variance different from the other variances?
Question:Top managers of Marshall Industries predicted 2018 sales of 14,800 units of its product at a unit price of \(9.50. Actual sales for the year were 14,600 units at \)12.00 each. Variable costs were budgeted at \(2.00 per unit, and actual variable costs were \)2.10 per unit. Actual fixed costs of \(48,000 exceeded budgeted fixed costs by \)4,000.
Prepare Marshall’s flexible budget performance report. What variance contributed most to the year’s favorable results? What caused this variance?
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