accounting 2

15.

Variable Overhead Spending and Efficiency Variances LO7

Hennings Travel Company specializes in the production of travel items (e.g., clocks, personal care kits). The following data were prepared so that a variance analysis could be performed:

Forecast Data (Expected Capacity)
Direct labor hours	40,000
Estimated overhead:
Fixed	$16,000
Variable	$30,000
Actual Results
Direct labor hours	37,200
Overhead:
Fixed	$16,120
Variable	$28,060

The number of standard hours allowed for actual production was 37,000.

Required

· A. Calculate the variable overhead spending variance.

· B. Calculate the variable overhead efficiency variance.

16.

Fixed Overhead Volume and Spending Variances LO8

Refer to the information in Exercise 15 .

Required

· A. Calculate the fixed overhead volume variance.

· B. Calculate the fixed overhead spending variance.

PROBLEMS

20.

Standard Costing LO1

Petty Petroleum, Inc., uses various chemicals to manufacture its products. Variance data for last month for the three primary chemicals used in production are as follows (F indicates a favorable variance; U indicates an unfavorable variance):

	X42	AY8	9BZ
Material price variance	$  84,000 F	$  50,000 F	$  42,000 U
Material usage variance	80,000 U	60,000 U	96,000 U
Total materials variance (net)	$   4,000 F	$  10,000 U	$138,000 U
Products requiring this chemical	200,000	220,000	250,000

The standard called for 1 pound of chemical for each product requiring the specific chemical. Because of falling prices in the chemical industry, Petty Petroleum generally paid less for chemicals last month than in previous months. Specifically, the average price paid was $0.40 per pound less than standard for chemical X42; it was $0.20 less for chemical AY8; and it was $0.14 greater for chemical 9BZ. All of the chemicals purchased last month were also used during the month.

Required

· A. For chemical X42, calculate the number of pounds of material purchased, the standard cost per pound of material, and the total standard material cost.

· B. For chemical AY8, calculate the number of pounds of material purchased, the standard cost per pound of material, and the total standard material cost.

· C. For chemical 9BZ, calculate the number of pounds of material purchased, the standard cost per pound of material, and the total standard material cost.

23.

Comprehensive Variance Analysis LO3, 4, 5, 6

Timmer Bachman founded the Bachman Corporation over 25 years ago. The company’s genesis was spurred by the unique climbing apparatus developed by Timmer, an avid mountaineer. Bachman Corporation has continued to produce that first product, but it has now diversified into other outdoor activity equipment as well. In fact, the vast majority of the company’s revenues are now accounted for by sales of nonclimbing products. Timmer is considering whether his company should continue producing and selling some of its oldest products, all of which relate to mountain climbing.

To begin his decision-making process, Timmer has asked the company’s controller, Marin Hennesy, to accumulate data on the original locking carabiner that set the company on its way. Accordingly, Marin accumulated the following data for last year:

· • Budgeted production and sales: 5,000 carabiners.

· • Actual production and sales: 6,000 carabiners.

· • The standard for a carabiner requires 1.5 ounces of material at a budgeted cost of $1.52 per ounce and two hours of assembly and testing time at a cost of $12.50 per hour.

· • The carabiner sells for $32 each.

· • Actual production costs for the 6,000 carabiners totaled $12,900 for 8,600 ounces of materials and $161,700 for 13,200 labor hours.

Required

· A. What was the budgeted contribution margin per carabiner?

· B. What was the actual contribution margin per carabiner?

· C. What was Bachman’s flexible budget variance?

· D. What was Bachman’s direct material price variance?

· E. What was Bachman’s direct material usage variance?

· F. What was Bachman’s direct labor rate variance?

· G. What was Bachman’s direct labor efficiency variance?

· H. What would the sales price variance be if each carabiner sold for $33?

· I. On the basis of the available information, should Bachman continue making the carabiner?