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Managerial Accounting Tools For Business Decision Making 7th Edition By Paul – Test Bank
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Managerial Accounting Tools For Business Decision Making 7th Edition By Paul – Test Bank

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Edition: 7th Edition

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Managerial Accounting Tools For Business Decision Making 7th Edition By Paul – Test Bank

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 11-1

(a) Standards are stated as a per unit amount. Thus, the standards are materials $2.80 ($1,400,000 ÷ 500,000) and labor $3.40 ($1,700,000 ÷ 500,000).

(b) Budgets are stated as a total amount. Thus, the budgeted costs for the year are materials $1,400,000 and labor $1,700,000.

BRIEF EXERCISE 11-2

(a) Standard direct materials price per gallon = $2.60 ($2.30 + $.20 + $.10).
(b) Standard direct materials quantity per gallon = 4 pounds (3.6 + .4).
(c) Standard materials cost per gallon = $10.40 ($2.60 X 4).

BRIEF EXERCISE 11-3

(a) Standard direct labor rate per hour = $16.00 ($14.00 + $.80 + $1.20).
(b) Standard direct labor hours per gallon = 1.5 hours (1.1 + .25 + .15).
(c) Standard labor cost per gallon = $24.00 ($16.00 X 1.5).

BRIEF EXERCISE 11-4

Total materials variance = $1,192 U (3,200 X $5.06*) – (3,000** X $5.00).
Materials price variance = $192 U (3,200 X $5.06) – (3,200 X $5.00).
Materials quantity variance = $1,000 U (3,200 X $5.00) – (3,000 X $5.00).

*$16,192 ÷ 3,200 **1,500 X 2

BRIEF EXERCISE 11-5

Total labor variance = $1,220 U (2,150 X $10.80) – (2,000* X $11.00).
Labor price variance = $430 F (2,150 X $10.80) – (2,150 X $11.00).
Labor quantity variance = $1,650 U (2,150 X $11.00) – (2,000 X $11.00).

*1,000 X 2

BRIEF EXERCISE 11-6

The formula is: Actual
Overhead
$118,000
–
– Overhead
Applied
*$123,600*
=
Total Overhead Variance
$5,600 F
*20,600 X $6 = $123,600

BRIEF EXERCISE 11-7

1.
2.
3.
4. financial
customer
internal process
learning and growth (c)
(d)
(a)
(b) return on assets
brand recognition
plant capacity utilization
employee work days missed due
to injury

*BRIEF EXERCISE 11-8

(a) Raw Materials Inventory 12,000
Materials Price Variance    500
Accounts Payable 11,500

(b) Work in Process Inventory (5,800 X $2*) 11,600
Materials Quantity Variance    400
Raw Materials Inventory (5,600 X $2) 11,200
*$12,000 ÷ 6,000

*BRIEF EXERCISE 11-9

(a) Factory Labor 24,900
Labor Price Variance 900
Factory Wages Payable 24,000

(b) Work in Process Inventory (3,150 X $8.30*) 26,145
Labor Quantity Variance   1,245
Factory Labor 24,900

*$24,900 ÷ 3,000

*BRIEF EXERCISE 11-10

The formula is:
Actual Overhead
$118,000
–
– Overhead
Budgeted
*$132,400*
= Overhead
Controllable Variance
$14,400 F

*(20,600 X $4) + $50,000 = $132,400

*BRIEF EXERCISE 11-11

The formula is:
Fixed
Overhead
Rate
X
(Normal Capacity Hours – Standard Hours Allowed)
= Overhead
Volume
Variance

$2.00*/hr.
X
(25,000 – 20,600)
=
$8,800 U

*($50,000 ÷ 25,000 hrs.)

SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 11-1

Manufacturing Cost
Element Standard Quantity X Standard Price = Standard Cost
Direct materials 2 pounds $ 5.00 $10.00
Direct labor 0.2 hours 16.00 3.20
Manufacturing overhead 0.2 hours 20.00* 4.00
Total $17.20

DO IT! 11-2

The variances are:
Total materials variance = (29,000 X $6.30) – (32,000* X $6.00) = $9,300 favorable
Materials price variance = (29,000 X $6.30) – (29,000 X $6.00) = $8,700 unfavorable
Materials quantity variance = (29,000 X $6.00) – (32,000* X $6.00) = $18,000 favorable
*(16,000 X 2)

DO IT! 11-3

The variances are:
Total labor variance = (4,000 X $14.30) – (3,800* X $14.00) = $4,000 unfavorable
Labor price variance = (4,000 X $14.30) – (4,000 X $14.00) = $1,200 unfavorable
Labor quantity variance = (4,000 X $14.00) – (3,800* X $14.00) = $2,800 unfavorable
Total overhead variance = $81,300 – $83,600** = $2,300 favorable

*2,000 X 1.9
**3,800 hours X $22.00

DO IT! 11-4

Sales revenue $92,100
Cost of goods sold (at standard) 51,600
Standard gross profit 40,500
Variances
Materials price $350 U
Materials quantity 1,700 F
Labor price 800 F
Labor quantity 500 F
Overhead 1,200 U
Total variance favorable 1,450
Gross profit (actual) $41,950

SOLUTIONS TO EXERCISES

EXERCISE 11-1

(a) Direct materials: (2,000 X 3) X $5 = $30,000
Direct labor: (2,000 X 1/2) X $16 = $16,000
Overhead: $16,000 X 70% = $11,200

(b) Direct materials: 3 X $5 = $15.00
Direct labor: 1/2 X $16 = 8.00
Overhead: $8.00 X 70% = 5.60
Standard cost: $28.60

(c) The advantages of standard costs which are carefully established and prudently used are:
1. Management planning is facilitated.
2. Greater economy is promoted by making employees more cost-conscious.
3. Setting selling prices is facilitated.
4. Management control is enhanced by having a basis for evaluation of cost control.
5. Variances are highlighted in management by exception.
6. Costing of inventories is simplified and clerical costs are reduced.

EXERCISE 11-2

 

Ingredient Amount
Per
Gallon
Standard
Waste
Standard
Usage
Standard
Price Standard
Cost Per
Gallon

Grape concentrate
Sugar (54 ÷ 50)
Lemons (60 ÷ 50)
Yeast
Nutrient
Water (2,600 ÷ 50) 60* oz.
1.08 lb.
1.2
1 tablet
1 tablet
52 oz.  4%
10%
25%
0%
0%
0% (a)
(b)
(c) 62.5 oz.
1.20 lb.
1.6
1 tablet
1 tablet
52 oz. $.06
.30
.60
.25
.20
.005 $3.75
.36
.96
.25
.20
.26
$5.78

*3,000 ÷ 50

(a) .96X = 60 ounces; or X = (60 ounces)/.96.
(b) .90X = 1.08 pounds; or X = (1.08 pounds)/.90.
(c) .75X = 1.2 lemons; or X = (1.2 lemons)/.75.

EXERCISE 11-3

Direct materials
Cost per pound [($5 – (2% X $5)) + $0.25] $5.15
Pounds per unit (4.5 + 0.5) X   5 $25.75

Direct labor
Cost per hour ($12 + $3) $ 15
Hours per unit (2 + .4) X 2.4 36.00

Manufacturing overhead
2.4 hours X $7 16.80
Total standard cost per unit $78.55

EXERCISE 11-4

(a) Actual service time
Setup and downtime
Cleanup and rest periods
Standard direct labor hours per oil change 1.0 hours
0.2 hours
0.3 hours
1.5 hours

(b) Hourly wage rate
Payroll taxes ($12 X 10%)
Fringe benefits ($12 X 25%)
Standard direct labor hourly rate $12.00
1.20
3.00
$16.20

(c) Standard direct labor cost per oil change =
= 1.50 hours X $16.20 per hour
$24.30

(d) Direct labor quantity variance =
=
= (1.60 hours X $16.20) – (1.50 hours X $16.20)
$25.92 – $24.30
$1.62 U

EXERCISE 11-5

(a) Total materials variance:
(  AQ  X  AP )
(29,000 X $4.70)
$136,300 –

– (  SQ  X  SP )
(28,200* X $5.00)
$141,000

=

$4,700 F

*9,400 X 3

Materials price variance:
( AQ  X  AP )
(29,000 X $4.70)
$136,300 –

– (  AQ  X  SP )
(29,000 X $5.00)
$145,000

=

$8,700 F

Materials quantity variance:
( AQ  X  SP  )
(29,000 X $5.00)
$145,000 –

– (  SQ  X  SP )
(28,200 X $5.00)
$141,000

=

$4,000 U

(b) Total materials variance:
(  AQ  X  AP )
(28,000 X $5.15)
$144,200 –

– (  SQ  X  SP )
(28,200 X $5.00)
$141,000

=

$3,200 U

Materials price variance:
(  AQ  X  AP )
(28,000 X $5.15)
$144,200 –

– (  AQ  X  SP )
(28,000 X $5.00)
$140,000

=

$4,200 U

Materials quantity variance:
(  AQ  X  SP )
(28,000 X $5.00)
$140,000 –

– (  SQ  X  SP )
(28,200 X $5.00)
$141,000

=

$1,000 F

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