Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) Actual Quantity of Input, at Standard Price (AQ × SP) Actual Quantity of at Actual Price (AQ × AP) 150,000 pounds* × $8.00 per pound = $1,200,000 160,000 pounds × $8.00 per pound = $1,280,000 170,000 pounds × $7.50 per pound = $1,275,000 Materials quantity variance = $80,000 U 170,000 pounds × $8.00 per pound = $1,360,000 Materials variance = $85,000 F *30,000 units × 5 pounds per unit = 150,000 units Alternatively, the variances can be computed using the formulas: Materials quantity variance = SP (AQ – SQ) = $8.00 per pound (160,000 pounds – 150,000 pounds) = $80,000 U Materials variance = AQ (AP – SP) = 170,000 pounds ($7.50 per – $8.00 per pound) = $85,000 F The Foundational 15 (continued) 6., 7., and 8. The direct labor cost included in the flexible budget (SH × SR = $840,000), the labor efficiency variance ($70,000 F), and the labor rate variance ($55,000 U) can be computed using the general model for cost variances as follows: Standard Hours Allowed for Actual Output, Actual Hours of Input, at Standard Rate (AH × SR) Actual Hours of Input, at Actual Rate (AH × AR)
Flexible Budget Actual Results Spending Variances Units sold(q) 30,000 30,000 Expenses: Advertising ($200,000) $200,000 $210,000 $10,000 U Sales salaries and commissions ($100,000 + $12.00q) $460,000 $455,000 $5,000 F Shipping expenses ($3.00q) $90,000 $115,000 $25,000 U Exercise 8-3 (15 minutes) Tours Planning Budget For the Month Ended August 31 Budgeted cruises (q1) 58 Budgeted passengers (q2) 3,200 Revenue ($28.00q2) $89,600 Expenses: Vessel operating costs ($6,800 + $475.00q1 +$3.50q2) 45,550 Advertising ($2,700) 2,700 Administrative ($5,800 + $36.00q1 + $1.80q2) 13,648 Insurance ($3,600) 3,600 Total expense 65,498 Net operating income $24,102 Exercise 8-13 (20 minutes) 1. Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) Actual Quantity of Input, at Standard Price (AQ × SP) Actual Quantity of Input, at Actual Price (AQ × AP) 18,000 ounces* × $2.50 per = $45,000 20,000 ounces × $2.50 per ounce = $50,000 20,000 ounces × $2.40 per ounce = $48,000 Materials quantity variance = $5,000 U Materials variance = $2,000 F
computed on the entire amount of materials purchased, whereas the materials quantity variance is computed only on the amount of materials used in production. Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) Actual Quantity of at Standard Price (AQ × SP) Actual Quantity of Input, at Actual Price (AQ × AP) 40,000 diodes* × $0.30 per diode = $12,000 50,000 diodes × $0.30 per diode = $15,000 70,000 diodes × $0.28 per diode = $19,600 Materials quantity variance = $3,000 U 70,000 diodes × $0.30 per diode = $21,000 Materials variance = $1,400 F *5,000 toys × 8 diodes per toy = 40,000 diodes Alternatively, the variances can be computed using the formulas: Materials quantity variance = SP (AQ – SQ) = $0.30 per diode (50,000 diodes – 40,000 diodes) = $3,000 U Materials price variance = AQ (AP – SP) = 70,000 diodes ($0.28 per diode – $0.30 per diode) = $1,400 F Exercise 8-17 (continued) b. Direct variances: Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) Actual Hours of Input, at Standard Rate (AH × SR) Actual Hours of Input, at Actual Rate (AH × AR)