Professional Documents
Culture Documents
Solutions Solution Manual10
Solutions Solution Manual10
E.01
per
#ilogram
2*0!000
#ilograms
purchased
E.00
per
#ilogram
200!000
#ilograms
allowed
E.00
per
#ilogram
E11*!*00 E112!000 E1.0!000
E2!*00 6nfavorable
4irect-material
price variance
210!000
#ilograms
used
E.00
per
#ilogram
E1.0!000
E0!000
6nfavorable
4irect-material
quantity
variance
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#, Solutions Manual
8C87(5/8 10-21 +(%:"5:684,
4578("-HAJ%7 7A"8 A:4 8==5(58:(I ?A75A:(8/
A("6AH HAJ%7 (%/" /"A:4A74 HAJ%7 (%/"
Actual
&ours
Actual
7ate
Actual
&ours
/tandard
7ate
/tandard
&ours
/tandard
7ate
1$!000
hours
used
E1..$0
per
hour
1$!000
hours
used
E1..00
per
hour
12!-00
hours
allowed
E1..00
per
hour
E211!100 E200!000 E200!000
E$!100 6nfavorable E0!000 6nfavorable
4irect-labor
rate variance
4irect-labor
efficiency variance
E11!100 6nfavorable
4irect-labor variance
8C87(5/8 10-$0 +10 M5:6"8/,
Answers will vary widely! depending on the company and the product. "ypically! new
products present challenges in setting standards! particularly if they involve new
production processes or materials. Managerial accountants and engineers often loo#
to other similar products or other products manufactured using similar processes to
get an idea as to what the standard cost of a new product should be.
8C87(5/8 10-$1 +10 M5:6"8/,
/tandard quantity
&ardwood in finished product............................................. 0 board feet
Allowance for normal scrap................................................ 2 board feet
"otal standard quantity required per box........................... 10 board feet
/tandard price
2urchase price per board foot of hardwood...................... E *.00
"ransportation cost per board foot.................................... 1.-0
"otal standard price per board foot.................................... E -.-0
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- -
8C87(5/8 10-$1 +(%:"5:684,
/tandard direct-material cost of a ;ewelry box
/tandard quantity................................................................. 10 board feet
2rice per board foot............................................................. E -.-0
/tandard direct-material cost.............................................. E--.00
8C87(5/8 10-$2 +1- M5:6"8/,
4irect-material price variance D PQ(AP SP)
D .!000+E).$0 F E).00,
D E1!000 6nfavorable
4irect-material quantity variance D SP(AQ SQ)
D E).00+*!200G F *!000
K
,
D E1!*00 6nfavorable
GAQ D *!200 pounds D E$0!..0 E).$0 per pound
K
SQ D *!000 pounds D 2!000 units 2 pounds per unit
4irect-labor rate variance D AH(AR SR)
D .!*-0G+E10.10 F E10.00,
D E.*- 6nfavorable
GAH D .!*-0 hours D E11.!)*- E10.10 per hour
4irect-labor efficiency variance D SR(AH SH)
D E10+.!*-0 F .!000,G
D E0!100 6nfavorable
GSH D .!000 hours D 2!000 units $ hours per unit
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#". Solutions Manual
8C87(5/8 10-$$ +$0 M5:6"8/,
4578("-MA"875AH 275(8 A:4 36A:"5"I ?A75A:(8/
A("6AH MA"875AH (%/" /"A:4A74 MA"875AH (%/"
Actual
3uantity
Actual
2rice
Actual
3uantity
/tandard
2rice
/tandard
3uantity
/tandard
2rice
.!000
pounds
purchased
E).$0
per
pound
.!000
pounds
purchased
E).00
per
pound
*!000
pounds
allowed
E).00
per
pound
E*$!000 E*2!000 E20!000
E1!000 6nfavorable
4irect-material
price variance
*!200
pounds
used
E).00
per
pound
E21!*00
E1!*00
6nfavorable
4irect-material
quantity
variance
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- ""
8C87(5/8 10-$$ +(%:"5:684,
4578("-HAJ%7 7A"8 A:4 8==5(58:(I ?A75A:(8/
A("6AH HAJ%7 (%/" /"A:4A74 HAJ%7 (%/"
Actual
&ours
Actual
7ate
Actual
&ours
/tandard
7ate
/tandard
&ours
/tandard
7ate
.!*-0
hours
used
E10.10
per
hour
.!*-0
hours
used
E10.00
per
hour
.!000
hours
allowed
E10.00
per
hour
E11.!)*- E11.!100 E100!000
E.*- 6nfavorable E0!100 6nfavorable
4irect-labor
rate variance
4irect-labor
efficiency variance
E0!)*- 6nfavorable
4irect-labor variance
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#"$ Solutions Manual
8C87(5/8 10-$* +2- M5:6"8/,
1. +a, /tatistical control chart with variance data plotted
+b, %nly the variances in May and 9une would be investigated! since they are the only
ones that exceed 1 standard deviation! E1-0.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- "%
=avorable variances
1 standard deviation
9anuary =ebruary March April May 9une
"ime
E1!000
E-00
0
E-00
E1!000
6nfavorable variances
1 standard deviation
min. 1*.*
-
1, +-
board per min. 12
K
=
+
6nfavorable variances
9an =eb Mar Apr May 9un 9ul Aug /ept %ct :ov 4ec
27%JH8M 10--* +*0 M5:6"8/,
Memorandum
4ate "oday
"o 2resident! 2ittsburgh 2lastics (orporation
=rom 5. M. /tudent
/ub;ect 2erformance of :orth &ills 2lant
1. "he :orth &ills 2lant@s performance for the period 9anuary through 9une is
summari'ed as follows
a. 2roduction processing and productivity
"he plant@s cycle time +or throughput time, has improved over the period
from 20 hours to 1) hours +average of 10.0 hours,. "his indicates that the
efficiency of the actual processing of products has improved. (onsistent
with this observation is the reduction in setup time from )0 to .2 hours
+average of .-.-,. &owever! the plant@s manufacturing cycle efficiency has
declined through the period! indicating that too much time is being spent
on inspection time! waiting time! and move time! relative to actual
processing time. %vertime hours have increased due to higher demand
late in the period. 2ower consumption has remained stable.
b. 2roduct quality and customer acceptance
"he plant@s quality control program appears to be paying off. "he number
of defective units in finished goods declined dramatically! and no products
were returned. "his is the result of the plant@s inspectors more effectively
identifying defective units while still in process. 8ffort should be devoted
in the future to the reduction of the in-process defective rate.
c. 4elivery performance
4elivery performance is good! but could be improved. All orders were
filled! but only an average of 1- percent of the orders were filled on time in
May and 9une. "his probably reflects the increased demand! as evidenced
by the increase in overtime hours.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#%, Solutions Manual
27%JH8M 10--* +(%:"5:684,
d. 7aw material! scrap and inventory
"he rate of defective raw materials has declined to 'ero. "he purchasing
team is doing a good ;ob by ensuring delivery of high-quality raw
materials. 5nventory value has been steady through the period with an
average of *.0 percent of sales. "his is probably as low as can reasonably
be expected in this industry.
e. Machine maintenance
Machine downtime improved during the period from $0 hours to 10 hours
+average of 21.) hours,! but bottlenec# machine downtime was too high!
particularly in May. Also! unscheduled machine maintenance calls were up
in May and 9une.
2. 7ecommended actions
a. 5nvestigate the reasons behind the decline in manufacturing-cycle
efficiency. (oncentrate on the elimination of non-value-added activities!
such as move time and wait time.
b. Maintain inspections in process. "ry to reduce the in-process defective
rate by emphasi'ing the importance of quality to the wor# force.
c. 5nvestigate causes of bottlenec# machine downtime and correct the
situation.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- %-
27%JH8M 10--- +*- M5:6"8/,
1. (ategories of measures
Area of Manufacturing
2erformance
(ycle time +days,........................................................................ a
:umber of defective finished products.................................... b
Manufacturing-cycle efficiency................................................. a
(ustomer complaints................................................................. c
6nresolved complaints.............................................................. c
2roducts returned...................................................................... b!c
<arranty claims......................................................................... b!c
5n-process products re;ected.................................................... d
Aggregate productivity.............................................................. a!e
:umber of units produced per day per employee................... a!e
2ercentage of on-time deliveries.............................................. f
2ercentage of orders filled........................................................ f
5nventory valueMsales revenue.................................................. g!h
Machine downtime +minutes,.................................................... i
Jottlenec# machine downtime +minutes,................................. i
%vertime +minutes, per employee............................................. a!e
Average setup time +minutes,................................................... a
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#&. Solutions Manual
27%JH8M 10--- +(%:"5:684,
2. Memorandum
4ate "oday
"o Management! Med"ech! 5nc.
=rom 5. M. /tudent
/ub;ect 2erformance of &arrisburg plant during 1st quarter
"he performance of the &arrisburg plant is evaluated in nine #ey areas
a. 2roduction processing
(ycle time! manufacturing-cycle efficiency! and productivity measures all
point to consistency and high-level performance throughout the measurement
period. Joth cycle time and manufacturing-cycle efficiency exhibit slight!
favorable trends.
b. 2roduct quality
"he number of defective finished products! number of products returned! and
warranty claims all show improvement over the period. All three measures
suggest excellent performance in quality control.
c. (ustomer acceptance
(ustomer complaints are steady with an average of ..- complaints during a
two-wee# period. "he number of unresolved complaints improved during the
period from 2 to 0. 2erformance in this area is very high! but there is a little
room for improvement.
d. 5n-process quality control
"he number of products re;ected in process has increased. "his spea#s well
for the in-process inspection effort. "he cause of these defective in-process
units should be investigated and corrected.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- &"
27%JH8M 10--- +(%:"5:684,
e. 2roductivity
Joth the aggregate productivity measure and the number of units produced
per day per employee remained relatively steady throughout the period. "he
latter of these two measures exhibited a slight! favorable trend.
f. 4elivery performance
Joth performance measures +percentages of on-time deliveries and orders
filled, were very high through the period! finishing at 100 percent in period ..
g. R h. 7aw material and scrapB inventory
5nventory valueMsales revenue remained consistently low through the period
+average of 1.0$ percent,.
i. Machine maintenance
Machine downtime was low through the period +average of 0* minutes each
two-wee# period,. Jottlenec# machine downtime was low except in period -.
"he cause of that incident should be investigated.
%verall evaluation
"he &arrisburg plant has performed at a very high level of efficiency in virtually
every phase of its operations during the 1st quarter.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#&$ Solutions Manual
27%JH8M 10--. +*- M5:6"8/,
1. a. "he semiannual installments and total bonus for the (harter 4ivision are
calculated as follows
C3ARTER 2IVISION
6AIN#S3ARIN6 /ON!S CA)C!)ATION
4OR T3E 1EAR EN2E2 2ECEM/ER %"5 $.*"
=irst installment! 9anuaryF9une
2rofitability +.02 E*.2!000,................................. E 1!2*0
7ewor# S+.02 E*.2!000, F E11!-00T..................... +2!2.0,
%n-time delivery +no bonusNunder 1.L,............ -0-
/ales returns
US+.01- E*!200!000, F E0*!000T -0LV........ +10!-00,
/emiannual installment......................................... E +$!-20,
=irst semiannual bonus awarded.............................. E 0
/econd installment! 9ulyF4ecember
2rofitability +.02 E**0!000,................................. E 0!000
7ewor# S+.02 E**0!000, F E11!000T..................... +2!200,
%n-time delivery +1.LF10L,................................. 2!000
/ales returns
US+.01- E*!*00!000, F E)0!000T -0LV........ +2!000,
/emiannual installment......................................... E .!.00
/econd semiannual bonus awarded......................... .!.00
"otal bonus awarded for the year............................. E.!.00
b. "he employees of the (harter 4ivision are li#ely to be frustrated by the new plan!
since the division bonus is more than E20!000 less than that of the previous
year! when sales and operating income were similar. &owever! both on-time
deliveries and sales returns improved in the second half of the year! while
rewor# costs were relatively even. 5f the division continues to improve at the
same rate! the (harter 4ivision bonus will approximate or exceed what it was
under the old plan. "he only open question is whether the employees have
sufficient motivation to effect improvement.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- &%
27%JH8M 10--. +(%:"5:684,
2. a. "he semiannual installments and total bonus for the Mesa 4ivision are
calculated as follows
MESA 2IVISION
6AIN#S3ARIN6 /ON!S CA)C!)ATION
4OR T3E 1EAR EN2E2 2ECEM/ER %"5 $.*"
=irst installment! 9anuaryF9une
2rofitability +.02 E$*2!000,................................. E.!0*0
7ewor# S+.02 E$*2!000, F E.!000T....................... -0-G
%n-time delivery +over 10L,.................................. -!000
/ales returns
US+.01- E2!0-0!000, F E**!)-0T -0LV........ +1!000,
/emiannual installment......................................... E10!0*0
=irst semiannual bonus awarded.............................. E10!0*0
/econd installment! 9uly-4ecember
2rofitability +.02 E*0.!000,................................. E0!120
7ewor# S+.02 E*0.!000, F E0!000T....................... -0-G
%n-time delivery +no bonusNunder 1.L,............ -0-
/ales returns
US+.01- E2!100!000, F E*2!-00T -0LV........ $!000
K
/emiannual installment......................................... E11!120
/econd semiannual bonus awarded......................... 11!120
"otal bonus awarded for the year.............................. E21!1.0
G7ewor# costs not in excess of 2 percent of operating income.
K
E$!000! since sales returns are less than 1.- percent of sales.
b. "he employees of the Mesa 4ivision should be as satisfied with the new plan as
with the old plan! because the bonus was almost equivalent. &owever! there is
no sign of improvements in this divisionB in fact! on-time deliveries declined
considerably in the second half of the year. "herefore! the bonus situation may
not be as favorable in the future. 4ecreased bonuses could motivate the
employees to improve! or they could frustrate employees and undermine their
motivation.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#&& Solutions Manual
27%JH8M 10--. +(%:"5:684,
$. &arrington@s revised bonus plan for the (harter 4ivision fostered improvements
including the following
5ncrease of 1.1 percent in on-time deliveries
E-00 reduction in rewor# costs
E1*!000 reduction in sales returns
&owever! operating income as a percentage of sales has decreased from 11 to 10
percent.
"he Mesa 4ivision@s bonus has remained at the status quo. "he effects of the
revised plan at MedHine 8quipment (orporation have been offset by the following
5ncrease of 2 percent in operating income as a percentage of sales +from 12 to 1*
percent,
4ecrease of $.. percent in on-time deliveries
E2!000 increase in rewor# costs
E2!2-0 decrease in sales returns
"hese results suggest that the gain-sharing bonus plan needs revisions.
/uggestions include the following
(reating a reward structure for rewor# costs that are below 2 percent of operating
income that would encourage employees to drive costs lower.
7eviewing the whole year in total. "he bonus plan should carry forward the
negative amounts for one six-month period into the next six-month period!
incorporating the entire year when calculating a bonus.
4eveloping benchmar#s! and then giving rewards for improvements over prior
periods and encouraging continuous improvement.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- &'
27%JH8M 10--) +-0 M5:6"8/,
1. a. 4irect-labor rate variance D (AH AR) F (AH SR)
D +$.!-00 E0.2*G, F +$.!-00 E0.20,
D E1!*.0 6nfavorable
GE$00!).0 $.!-00 hours
b. 4irect-labor efficiency variance D (AH SR) F (SH SR)
D +$.!-00 E0.20, F +$)!200G E0.20,
D E-!)*0 =avorable
G/tandard allowed direct-labor hours
(ompleted units................ -!.00 units . hours per unit $$!.00 hours
2artially completed
units................................ 000 units )-L . hours per unit $!.00 hours
"otal standard
hours allowed................ $)!200 hours
c. Actual quantity of material used
4irect-material quantity variance D (AQ SP) F (SQ SP)
D +AQ E-.00, F +-1!200G E-.00,
D E1!-00 6nfavorable
"herefore E-+AQ F -1!200, D E1!-00
AQ F -1!200 D $00
AQ D -1!-00 #ilograms
G/tandard quantity of material allowed
(ompleted units................... -!.00 units 0 #ilograms **!000 #ilograms
2artially completed
units................................... 000 units 0 #ilograms .!*00 #ilograms
"otal standard
quantity allowed............... -1!200 #ilograms
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#&( Solutions Manual
27%JH8M 10--) +(%:"5:684,
d. Actual price paid per #ilogram of direct material
Actual price D E2*1!2-0M-0!000
D E*.10- per #ilogram
e. 4irect-material and direct-labor cost transferred to finished goods
4irect-material
cost transferred......................................... -!.00 units E*0 E22*!000
4irect-labor
cost transferred......................................... -!.00 units E*1.20 2)-!-20
"otal cost transferred.................................... E*11!-20
f. 4irect-material and direct-labor cost in :ovember $0 balance of <or#-in-2rocess
5nventory
4irect material.............................................. 000 units E*0 per unit E$2!000
4irect labor................................................... 000 units )-L E*1.20 21!-20
"otal cost in ending
<or#-in-2rocess 5nventory..................... E.1!-20
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- &+
27%JH8M 10--) +(%:"5:684,
2. 7aw-Material 5nventory........................................................ 2-0!000
4irect-Material 2rice ?ariance.................................. )-0G
Accounts 2ayable...................................................... 2*1!2-0
G4irect-material price variance D PQ(AP SP)
D -0!000+E*.10- F E-.00, D E)-0 =avorable
"o record the purchase of raw material and the direct-material price variance.
<or#-in-2rocess 5nventory.................................................. 2-.!000G
4irect-Material 3uantity ?ariance....................................... 1!-00
7aw-Material 5nventory.............................................. 2-)!-00
K
G-1!200 E-.00 D E2-.!000
K
-1!-00 E-.00 D E2-)!-00
"o add the direct-material cost to wor# in process and record the direct-material
quantity variance.
<or#-in-2rocess 5nventory.................................................. $0-!0*0G
4irect-Habor 7ate ?ariance................................................. 1!*.0
4irect-Habor 8fficiency ?ariance.............................. -!)*0
<ages 2ayable........................................................... $00!).0
G$)!200 E0.20 D E$0-!0*0
"o add the direct-labor cost to wor#-in-process! record the direct-labor rate and
efficiency variances! and recogni'e the actual direct-labor cost.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#&, Solutions Manual
27%JH8M 10--0 +2- M5:6"8/,
1. +a, 4irect-material price variance D PQ(AP SP)
2roduct
(alculation
PQ(AP SP)
2rice
?ariance
/tandard tent................... 2!100 +E..*0G F E.,................................ E0*0 6
4eluxe tent....................... 000 +E).10
K
F E0,................................... 00 =
4irect-material
price variance.................................................................................. E).0 6
GE..*0 D E1$!**0 2!100
K
E).10 D E.!$20 000
+b, 4irect-material quantity variance D SP(AQ SQ)
2roduct
(alculation
SP(AQ SQ)
3uantity
?ariance
/tandard tent................. E. +1!2-0 F 1!200G,.................................. E$00 6
4eluxe tent..................... E0 +)20 F )20
K
,........................................ -0-
4irect-material
quantity variance.............................................................................. E$00 6
G1!200 D 100 tents 12 lbs. per tent
K
)20 D 120 tents . lbs. per tent
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- &-
27%JH8M 10--0 +(%:"5:684,
2. 7aw-Material 5nventory................................................ 11!000G
4irect-Material 2rice ?ariance..................................... ).0
Accounts 2ayable.............................................. 11!).0
"o record purchase of tent fabrics.
GE11!000 D +2!100 lbs. E. per lb., O +000 lbs. E0 per lb.,
<or#-in-2rocess 5nventory.......................................... 12!1.0G
4irect-Material 3uantity ?ariance............................... $00
7aw-Material 5nventory...................................... 1$!2.0
K
"o record use of direct material.
GE12!1.0 D +1!200 lbs. E. per lb., O +)20 lbs. E0 per lb.,
K
E1$!2.0 D +1!2-0 lbs. E. per lb., O +)20 lbs. E0 per lb.,
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#'. Solutions Manual
27%JH8M 10--1 +.0 M5:6"8/,
1. /tandard cost schedule
4578(" MA"875AH
(onstruction
4epartment
=inishing
4epartment
/tandard quantity
4irect material and parts in finished product
?eneered wood....................................... ) lbs N
Jridge and strings.................................. N 1 set
Allowance for normal waste....................... 1 lb N
"otal standard quantity per guitar................. 0 lbs 1 set
/tandard price
4irect material and parts
?eneered wood....................................... E12 per lb N
Jridge and strings.................................. N E1- per set
/tandard direct-material cost
/tandard quantity........................................ 0 lbs 1 set
/tandard price............................................. E12 per lb E1- per set
/tandard cost per guitar............................. E1. per guitar E1- per guitar
Actual output in 9uly................................... -00 guitars -00 guitars
"otal standard cost of direct material
in 9uly........................................................... E*0!000 E)!-00
4578(" HAJ%7
(onstruction
4epartment
=inishing
4epartment
/tandard direct-labor cost
/tandard quantity........................................ . hrs $ hrs
/tandard rate...............................................
E 20 E1-
/tandard cost per guitar............................. E120 E*-
Actual output in 9uly................................... -00 guitars -00 guitars
"otal standard cost of direct labor
in 9uly........................................................... E.0!000 E22!-00
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- '"
27%JH8M 10--1 +(%:"5:684,
2. +a, (onstruction 4epartment
4578("-MA"875AH 275(8 A:4 36A:"5"I ?A75A:(8/
A("6AH MA"875AH (%/" /"A:4A74 MA"875AH (%/"
Actual
3uantity
Actual
2rice
Actual
3uantity
/tandard
2rice
/tandard
3uantity
/tandard
2rice
.!000
pounds
purchased
E12.-0
per
pound
.!000
pounds
purchased
E12.00
per
pound
*!000
pounds
allowed
E12.00
per
pound
E)-!000 E)2!000 E*0!000
E$!000 6nfavorable
4irect-material
price variance
*!-00
pounds
used
E12.00
per
pound
E-*!000
E.!000
6nfavorable
4irect-material
quantity
variance
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#'$ Solutions Manual
27%JH8M 10--1 +(%:"5:684,
4578("-HAJ%7 7A"8 A:4 8==5(58:(I ?A75A:(8/
A("6AH HAJ%7 (%/" /"A:4A74 HAJ%7 (%/"
Actual
&ours
Actual
7ate
Actual
&ours
/tandard
7ate
/tandard
&ours
/tandard
7ate
2!0-0
hours
used
E11
per
hour
2!0-0
hours
used
E20
per
hour
$!000
hours
allowed
E20
per
hour
E-*!1-0 E-)!000 E.0!000
E2!0-0 =avorable E$!000 =avorable
4irect-labor
rate variance
4irect-labor
efficiency variance
E-!0-0 =avorable
4irect-labor variance
+b, =inishing 4epartment
4578("-HAJ%7 7A"8 A:4 8==5(58:(I ?A75A:(8/
A("6AH HAJ%7 (%/" /"A:4A74 HAJ%7 (%/"
Actual
&ours
Actual
7ate
Actual
&ours
/tandard
7ate
/tandard
&ours
/tandard
7ate
1!-)0
hours
used
E1.
per
hour
1!-)0
hours
used
E1-
per
hour
1!-00
hours
allowed
E1-
per
hour
E2-!120 E2$!--0 E22!-00
E1!-)0 6nfavorable E1!0-0 6nfavorable
4irect-labor
rate variance
4irect-labor
efficiency variance
E2!.20 6nfavorable
4irect-labor variance
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- '%
27%JH8M 10--1 +(%:"5:684,
$. (ost variance report
SPRIN6STEEN COMPAN1
COST VARIANCE REPORT
4OR T3E MONT3 O4 0!)1
(onstruction 4epartment =inishing 4epartment
Amount
2ercentage of
/tandard (ost Amount
2ercentage of
/tandard (ost
4irect material
/tandard cost! given
actual output............... E*0!000 N E )!-00 N
4irect-material price
variance....................... $!000 6 ..2-L -0- -0-
4irect-material quantity
variance....................... .!000 6 12.-0L -0- -0-
4irect labor
/tandard cost! given
actual output............... E.0!000 N E22!-00 N
4irect-labor rate variance 2!0-0 = *.)-L 1!-)0 6 ..10L
4irect-labor efficiency
variance....................... $!000 = -.00L 1!0-0 6 *..)L
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#'& Solutions Manual
27%JH8M 10-.0 +*- M5:6"8/,
1. 9ournal entries
7aw-Material 5nventory........................................................ )2!000
4irect-Material 2rice ?ariance............................................. $!000
Accounts 2ayable...................................................... )-!000
"o record purchase of veneered wood.
7aw-Material 5nventory........................................................ 1!000
Accounts 2ayable...................................................... 1!000
"o record purchase of bridges and strings.
<or#-in-2rocess 5nventory.................................................. *0!000
4irect-Material 3uantity ?ariance....................................... .!000
7aw-material 5nventory............................................. -*!000
"o record usage of veneered wood.
<or#-in-2rocess 5nventory.................................................. )!-00
7aw-Material 5nventory.............................................. )!-00
"o record usage of bridges and strings.
<or#-in-2rocess 5nventory.................................................. .0!000
4irect-Habor 7ate ?ariance....................................... 2!0-0
4irect-Habor 8fficiency ?ariance.............................. $!000
<ages 2ayable........................................................... -*!1-0
"o record (onstruction 4epartment direct-labor costs and variances.
<or#-in-2rocess 5nventory.................................................. 22!-00
4irect-Habor 7ate ?ariance................................................. 1!-)0
4irect-Habor 8fficiency ?ariance........................................ 1!0-0
<ages 2ayable........................................................... 2-!120
"o record =inishing 4epartment direct-labor costs and variances.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- ''
27%JH8M 10-.0 +(%:"5:684,
=inished->oods 5nventory................................................... 1$0!000
<or#-in-2rocess 5nventory....................................... 1$0!000
"o record completion of -00 guitars at a standard cost of E2). each
+E2). D E1. O E1- O E120 O E*-,.
Accounts 7eceivable........................................................... 120!000
/ales 7evenue............................................................ 120!000
(ost of >oods /old 02!000
=inished->oods 5nventory......................................... 02!000
"o record sale of $00 guitars at a price of E*00 each and a standard cost of E2). each.
(ost of >oods /old.............................................................. -!))0
4irect-Habor 7ate ?ariance................................................. 1!200G
4irect-Habor 8fficiency ?ariance........................................ 1!1-0
K
4irect-Material 2rice ?ariance.................................. $!000
4irect-Material 3uantity ?ariance............................. .!000
"o close variances into (ost of >oods /old.
G/um of direct-labor rate variances E1!200 = D E2!0-0 = O E1!-)0 6
K
/um of direct-labor efficiency variances E1!1-0 = D E$!000 = O E1!0-0 6
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#'( Solutions Manual
27%JH8M 10-.0 +(%:"5:684,
2. 2osting of ;ournal entries
7aw-Material 5nventory Accounts 7eceivable
)2!000 -*!000 120!000
1!000 )!-00
<or#-in-2rocess 5nventory Accounts 2ayable
*0!000 1$0!000 )-!000
)!-00 1!000
.0!000
22!-00
=inished->oods 5nventory <ages 2ayable
1$0!000 02!000 -*!1-0
2-!120
(ost of >oods /old /ales 7evenue
02!000 120!000
-!))0
4irect-Material 2rice ?ariance 4irect-Habor 7ate ?ariance
$!000 $!000 1!-)0 2!0-0
1!200
4irect-Material
3uantity ?ariance
4irect-Habor
8fficiency ?ariance
.!000 .!000 1!0-0 $!000
1!1-0
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- '+
SO)!TIONS TO CASES
(A/8 10-.1 +.0 M5:6"8/,
1. /tandard cost of lots 22! 2$! and 2*
E!ROPEAN ST1)ES5 INC7
STAN2AR2 COST O4 PRO2!CTION
4OR NOVEM/ER
Hot
3uantity
+boxes,
/tandard
(ost per
Jox
"otal
/tandard
(ost
22.................................................................... 1!000 E10..-0
E10.!-00
2$.................................................................... 1!)00 10..-0
101!0-0
2*.................................................................... 1!200 10.*0G 100!-).
/tandard cost of production E$1.!12.
G/tandard material cost plus 00 percent of standard cost of labor and overhead
E2..*0 O +00L,+E**.10 O E$..00,.
2. ?ariances +6 denotes unfavorableB = denotes favorable,
E!ROPEAN ST1)ES5 INC7
2IRECT#MATERIA) PRICE VARIANCE
4OR NOVEM/ER
Actual cost of materials purchased.......................................................... E10.!*00
/tandard cost of materials purchased
+1-!000 E1.10,....................................................................................... 10*!-00
4irect-material price variance.................................................................... E 1!100 6
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#', Solutions Manual
(A/8 10-.1 +(%:"5:684,
E!ROPEAN ST1)ES5 INC7
2IRECT#MATERIA) AN2 2IRECT#)A/OR VARIANCES
4OR NOVEM/ER
Hot no.
22 2$ 2* "otal
4irect-material quantity
variance
/tandard yards
6nits in lot............................. 1!000 1!)00 1!200 $!100
/tandard yards
per lot............................... 2* 2* 2* 2*
"otal standard
quantity............................ 2*!000 *0!000 20!000 1$!.00
Actual yards used.................... 2*!100 *0!**0 20!02- 1$!$.-
?ariance in yardsG........................ 100 +$.0, 2- +2$-,
/tandard price............................. E1.10 E1.10 E1.10 E1.10
4irect-material
quantity variance.................. E 110 6 E +$1., = E2).-0 6 E+2-0.-0, =
G2arentheses denote favorable variance.
Hot no.
22 2$ 2* "otal
4irect-labor efficiency variance
/tandard hours
6nits in lot............................ 1!000 1!)00 1!200
/tandard hours
per lot........................... $ $ $
"otal...................................... $!000 -!100 $!.00
2ercentage of completion. . . 100 L 100 L 00 L
"otal standard hours............ $!000 -!100 2!000 10!100
Actual hours wor#ed............ 2!100 -!1$0 2!010 11!000
?ariance in hoursG.................... +20, $0 10 20
/tandard rate............................. E1*.)0 E1*.)0 E1*.)0 E1*.)0
4irect-labor
efficiency variance............ E +21*, = E**1 6 E1*) 6 E21* 6
G2arentheses denote favorable variance.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- '-
(A/8 10-.1 +(%:"5:684,
Hot no.
22 2$ 2* "otal
4irect-labor rate variance
Actual hours wor#ed.............. 2!100 -!1$0 2!010 11!000
7ate paid in excess of standard
+E1-.00 F E1*.)0,................ E .
$0
E .$0 E .$0 E .$0
?ariance..................................... E 01* 6 E1!-$1 6 E 0.) 6 E $!$00 6
$. 9ournal entries
7aw-material 5nventory........................................................ 10*!-00G
4irect-Material 2rice ?ariance............................................. 1!100
Accounts 2ayable...................................................... 10.!*00
G1-!000 E1.10 D E10*!-00
"o record the purchase of raw material.
<or#-in-2rocess 5nventory.................................................. 102!1.0G
4irect-Material 3uantity ?ariance............................. 2-0.-0
7aw-Material 5nventory.............................................. 102!)01.-0
G1$!.00 E1.10 D E102!1.0
"o add direct-material cost to wor#-in-process inventory and record the direct-material
quantity variance.
<or#-in-2rocess 5nventory.................................................. 1.1!*0.G
4irect-Habor 7ate ?ariance................................................. $!$00
4irect-Habor 8fficiency ?ariance........................................ 21*
<ages 2ayable........................................................... 1.-!000
G10!100 E1*.)0 D E1.1!*0.
"o add direct-labor cost to wor#-in-process inventory! record the direct-labor
variances! and record the incurrence of direct-labor cost.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#(. Solutions Manual
(A/8 10-.2 +)- M5:6"8/,
"he completed list is shown below. Jegin by filling in the facts you #now. "he reasoning
used to reduce the remaining data is explained after the list of answers.
1. Actual output +in drums,
D
drum per A material direct of quanity standard
output actual given allowed! A material direct of quantity standard
D
drums 1!000
drum per lb. 10
lb. 10!000
=
2.
4irect material A J
a. /tandard quantity per drum........................................ 10 lb. - gal.
a
b. /tandard price.............................................................. E-.00Mlb. E$.00Mgal.
b
c. /tandard cost per drum............................................... E-0.00
c
E1-.00
d. /tandard quantity allowed! given actual output........ 10!000 lb. -!000 gal.
e. Actual quantity purchased.......................................... 12!000 lb. .!000 gal.
f. Actual price.................................................................. E*.-0Mlb. E$.20Mgal.
d
g. Actual quantity used.................................................... 10!-00 lb.
e
*!000 gal.
h. 2rice variance............................................................... E.!000 =
f
E1!200 6
i. 3uantity variance......................................................... E2!-00 6 E.00 =
g
a
/tandard quantity of direct material J per drum
D
output actual
output actual given allowed! J material direct of quantity standard
D
gal. -
drums 1!000
gal. -!000
=
b
/tandard price of direct material J D
drum per allowed quantity standard
drum per J material of cost standard
D
gal. per E$.00
drum per gal. -
drum per E1-.00
=
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- ("
(A/8 10-.2 +(%:"5:684,
c
/tandard cost of direct material A per drum D 10 lbs. E-.00 per lb. D E-0.00.
d
"he reasoning for the actual price of direct material J is as follows! where the
subscripts denote materials A and J
5ncrease in
accounts payable
D
actual cost of
material purchases
D (PQ
A
AP
A
) O (PQ
'
AP
'
)
E)$!200 D +12!000 E*.-0 , O +.!000 AP
'
,
AP
'
D E$.20 per gallon
e
"his conclusion comes from the following formula for the quantity variance
3uantity variance +A, D SP(AQ SQ)
E2!-00 6 D +AQ F 10!000, E-.00
AQ D 10!-00 lb.
f
4irect material A price variance D PQ (AP SP)
D 12!000 +E*.-0 F E-.00,
D E.!000 =
g
4irect material J quantity variance D SP(AQ SQ)
D E$.00 +s*!000 F -!000,
D E.00 =
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#($ Solutions Manual
(A/8 10-.2 +(%:"5:684,
$.
4irect labor
5
+mixers,
55
+pac#ers,
a. /tandard hours per drum............................................ 2 hr.
a
* hr.
b. /tandard rate per hour................................................. E1-.00 E12.00
b
c. /tandard cost per drum............................................... E$0.00 E*0.00
d. /tandard quantity allowed! given actual output........ 2!000 hr.
c
*!000 hr.
d
e. Actual rate per hour..................................................... E1-.$0
e
E11.10
f. Actual hours................................................................. 2!000 hr
f
*!100 hr.
g
g. 7ate variance................................................................ E.00 6 E*10 =
h
h. 8fficiency variance....................................................... -0-
i
E1!200 6
a
/tandard hours of direct labor type 5 per drum
D
hour per rate standard
drum per 5 labor direct of cost standard
D
. hr 2
hr. per E1-.00
drum per E$0.00
=
b
4irect labor type 55! standard rate per hour
D
drum per hours standard
drum per 55 type labor direct of cost standard
D
E12.00
drum per hr. *
drum per E*0.00
=
c
4irect labor type 5! standard quantity allowed! given actual output
D 1!000 drums 2 hr. per drum
D 2!000 hr.
d
4irect labor type 55! standard quantity allowed given actual output
D 1!000 drums * hr. per drum
D *!000 hr.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- (%
(A/8 10-.2 +(%:"5:684,
e
4irect labor type 5! actual rate per hour D E1-.$0. 6se the formula for the direct-labor
rate variance as follows
4irect-labor rate variance D AH(AR SR)
E.00 6 D 2!000 +AR F E1-.00,
AR D E1-.$0
f
4irect labor type 5! actual hours D 2!000 hr. /ince there was no labor type 5 efficiency
variance! actual hours and standard hours are equal.
g
4irect labor type 55! actual hours D *!100 hr. 6se the formula for the direct-labor
efficiency variance! as follows
4irect-labor +55, efficiency variance D SR (AH SH)
E1!200 6 D E12.00 +AH F *!000,
AH D *!100 hr.
h
4irect-labor type 55! rate variance D AH (AR SR)
D *!100 +E11.10 F E12.00,
D E*10 =
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#(& Solutions Manual
(A/8 10-.2 +(%:"5:684,
i
4irect labor type 5! efficiency variance D 'ero.
9ust fill in the remaining variance in the following tabulation
4irect-material variances
A 2rice variance..................................................................................... E.!000 =
A 3uantity variance............................................................................... 2!-00 6
J 2rice variance..................................................................................... 1!200 6
J 3uantity variance............................................................................... .00 =
4irect-labor variances
5 7ate variance...................................................................................... .00 6
5 8fficiency variance............................................................................. W
55 7ate variance...................................................................................... *10 =
55 8fficiency variance............................................................................. 1!200 6
"otal +favorable variance because of credit to cost of >oods /old,........ E1!-10 =
"herefore! the direct-labor type 5 efficiency variance D E1!-10 F E.!000 O E2!-00
O E1!200 F E.00 O E.00 F E*10 O E1!200 D 0
*. "otal of all variances for the month E1!-10 = +favorable because of credit to (ost of
>oods /old,.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
Managerial Accounting, 5/e 10- ('
C!RRENT ISS!ES IN MANA6ERIA) ACCO!NTIN6
5//68 10-.$
X6./ A6"% MAY87/ "% 78? 62 %6"26" %= @&IJ754@ ?8&5(H8/!X (H) *ALL S(R))(
+$,R-AL! %("%J87 2*! 2000! 98==78I JAHH.
1. &ybrids boost fuel economy by adding an electric motor to a traditional internal
combustion engine.
2. 4eveloping standards for a radically new product is difficult at best. Manufacturers
generally try to find aspects of the new product +and the processes needed to
produce it, that are similar to products and processes with which they have
experience. 5nitial standards then can be inferred from these more familiar products
and processes. Also! using a target price analysis would allow auto ma#ers to
determine what price consumers would pay for a hybrid vehicle. "he auto ma#ers
could then wor# bac#wards toward reducing their costs in order to ma#e an
economically viable product.
5//68 10-.*
X(A: IA&%%Z "&75?8 5: A &A7/& (H5MA"8!X (H) *ALL S(R))( +$,R-AL! %("%J87
1.! 2000.
1. Iahoo is an online business that provides many free services.
2. Iahoo offers search capabilities! an auction! classifieds! travel information! mail!
photos! chat rooms! clubs and a myriad of other services.
$. "he article questions whether Iahoo will be innovative enough to be competitive as
the 5nternet business environment evolves over time. 5nnovation and learning is one
of the four ma;or areas covered by the balanced scorecard. Management could use
the balanced scorecard to put a spotlight on this area of critical importance to the
company.
McGraw-Hill/Irwin 2002 The McGraw-Hill Companies,
Inc.
10#(( Solutions Manual