Learning Materials
Features
Discover
Chapter 23: Q6RQ (page 1305)
Question: What are the two components of the static budget variance? How are they calculated?
Answer
Static budget variance is calculated by summing up the sales volume and flexible budget variance.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Understanding variance relationships
Complete the table below for the missing variances.
Total Flexible Budget Product Cost Variance (a) |
Total direct material variance (b) | Total direct labor variance (c) | Total Manufacturing Overhead Variance (d) |
Direct material cost variance | Direct material efficiency variance | Direct Labor Cost Variance | Direct Labor Efficiency Variance | Total Variable Overhead Variance | Total fixed overhead variance |
\(310F | \)165U | \(160U | \)415F | (e) | (f) |
Variable Overhead Cost Variance | Variable Overhead Efficiency Variance | Fixed Overhead Cost Variance | ||||
\(525U | \)575F | $50F |
Question:Mills, Inc. is a competitor of Murry, Inc. from Exercise E23颅18. Mills also uses a standard cost system and provides the following information:
Static budget variable overhead \( 1,200
Static budget fixed overhead \) 1,600
Static budget direct labor hours 800 hours
Static budget number of units 400 units
Standard direct labor hours 2 hours per unit
Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, \(4,000; actual fixed overhead, \)3,100; actual direct labor hours, 1,600.
Requirements
1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.
2. Explain why the variances are favorable or unfavorable
In 75 words or fewer, explain what a cost variance is and describe its potential causes.
Explain the difference between a favorable and an unfavorable variance.
The May 2018 revenue and cost information for McDonald Outfitters, Inc. follows:
Sales Revenue (at standard) $ 610,000
Cost of Goods Sold (at standard) 348,000
Direct Materials Cost Variance 1,500 F
Direct Materials Efficiency Variance 6,600 F
Direct Labor Cost Variance 4,200 U
Direct Labor Efficiency Variance 2,700 F
Variable Overhead Cost Variance 2,800 U
Variable Overhead Efficiency Variance 1,100
Fixed Overhead Cost Variance 2,300 U
Fixed Overhead Volume Variance 8,300 F
Prepare a standard cost income statement for management through gross profit. Report all standard cost variances for management鈥檚 use. Has management done a good or poor job of controlling costs? Explain.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine