Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1

Flexible budget Actual costs (Budgeted input
× Budgeted price × Budgeted price)
January March

15.19 Continuous
improvement.
(20 min)
1
Standard quantity input amounts per output unit are
Direct Direct

materials
manufacturing labour
January
10.0000 0.5000 February (January × 0.997)
9.9700 0.4985 March (February × 0.997)
9.9400 0.4970
2
The answer is identical to that for requirement 1 of Exercise 15.18 except for the flexible-budget amount.

Flexible
budget

Actual
costs
(Budgeted
input

incurred

allowed for actual

(Actual input
Actual input
output achieved

× Actual price)
× Budgeted price
× Budgeted price)
Purchases Usage Direct
(100,000 × €3.10*)
(100,000 × €3.00)
(98,073 × €3.00)
(9,810 × 9.940 × €3.00) materials
€310,000 €300,000 €294,219 €292,534

€10,000 U
€1,685 F Price variance Efficiency variance
Direct
(4,900 × €21**)
(4,900 × €20)
(9,810 × 0.497 × €20) manufacturing €102,900
€98,000
€97,511 labour
€4,900 U
€489 F
Price variance Efficiency variance
*
* €310,000 ÷ 100,000 = €3.10
** €102,900 ÷ 4,900 = €21 Using continuous improvement standards sets a tougher benchmark. The efficiency variances for January (from Exercise 15.18) and March (from Exercise 15.19) are
January March Direct materials
€81 F
€1,685 U Direct manufacturing labour
€100 F
€489 U
Note
: The question assumes that the continuous improvement applies only to quantity inputs. An alternative approach is to have continuous improvement applied to budgeted input cost per output unit (€30 for direct materials in January and €10 for direct manufacturing labour in January. This approach is more difficult to incorporate in a Level 2 variance analysis as Level 2 requires separate amounts for quantity inputs and the cost per input.

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

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