Actual
quantity
of inputs
(1)
Actual
unit cost
of inputs
(2)
Actual cost
of inputs
(3) = (1) ×
(2)
Budgeted
unit cost of
inputs
(4)
Actual
quantity of
inputs ×
Budgeted
unit cost of
inputs
(5) = (1) × (4)
Direct materials
17,280,000
*
pages
SFr a SFr
224,640
*
SFr c SFr
207,360 Direct labour costs
1,728
*
hours
SFr b SFr
50,112
*
SFr d SFr
51,840 a SFr 224,640 ÷ 17,280,000 = SFr 0.0130 per page b SFr 50,112 ÷ 1,728 = SFr 29.00 per hour c
SFr 180,000 ÷ 15,000,000 = SFr 0.0120 per paged SFr 45,000 ÷ 1,500 = SFr 30.00 per hour
*
Known
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 Budgeted input allowed per output unit (1) Actual output achieved (2) Budgeted unit cost of inputs (3) Flexible budget (4) = (1) × (2) × (3) Direct materials 50 320,000 SFr 0.0120 SFr 192,000 Direct labour costs e 320,000 SFr 30.00 48,000 e Budgeted 10,000 pages produced per labour hour yields budgeted output of 200 newspapers (50 pages each) per hour. Thus, each output unit is budgeted to require 0.005 units of a direct labour hour. The sales-volume variances for direct materials and direct labour are Sales-volume variance = Flexible-budget amount Static-budget amount Direct materials = (320,000 × 50 × SFr 0.012) − (SFr 180,000) = SFr 192,000 − SFr 180,000 = SFr 12,000 U Direct labour = 320,000 50 10,000 × × SFr 30 − (45,000) = SFr 48,000 − SFr 45,000 = SFr 3,000 U The price and efficiency variances for direct materials and direct labour are Actual costs incurred (Actual input × actual price) Price variance Actual input × Budgeted prices Efficiency variance Flexible budget (Budgeted input allowed for actual output achieved × Budgeted price) Direct materials SFr 224,640 SFr 17,280 U SFr 207,360 SFr 15,360 U SFr 192,000 Direct labour costs 50,112 1,728 F SFr 51,840 SFr 3,840 U 48,000 b Indirect cost variances A summary of the information is Actual Flexible budget Static budget Output units (papers) 320,000 320,000 300,000 Allocation base (printed paper) 17,280,000 a Allocation base per output unit 54 50 Variable MOH SFr 63,936 SFr c SFr 60,000 Variable MOH per printed page SFr 0.0037 SFr 0.0040 SFr 0.0040 b Fixed MOH SFr 97,000 SFr 90,000 SFr Fixed MOH per printed page SFr d SFr 0.0060 e a 320,000 × 50 = 16,000,000 d SFr 97,000 ÷ 17,280,000 = SFr 0.0056 per printed page b SFr 60,000 ÷ 15,000,000 = SFr 0.0040 per printed page e SFr 90,000 ÷ 15,000,000 = SFr 0.0060 per printed page c SFr 320,000 × 50 × SFr 0.0040 = SFr 64,000
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 The flexible-budget and sales-volume variances for variable indirect costs are Actual results Flexible budget variance Flexible budget Sales volume variance Static budget (17,280,000 × SFr 00.0037) SFr 63,936 (16,000,000 × SFr 0.004) SFr 69,120 (15,000,000 × SFr 0.004) SFr 60,000 ↑ SFr F SFr 4,000 U Flexible-budget variance Sales-volume variance ↑ SFr 3,936 U ↑ Static-budget variance The spending and efficiency variances for variable indirect costs are Actual costs incurred Actual input × Budgeted rate Flexible budget Budgeted input allowed for actual output achieved × Budgeted rate (17,280,000 × SFr 0.0037) SFr 63,936 (17,280,000 × SFr 0.004) SFr 69,120 (16,000,000 × SFr 0.004) SFr 64,000 ↑ SFr 5,184 F SFr 5,120 U Spending variance Efficiency variance ↑ SFr 64 F ↑ Flexible-budget variance The spending and production-volume variances for fixed indirect costs are Actual costs incurred Same lump-sum regardless of output level Same lump-sum regardless of output level Allocated: Budgeted input allowed for actual output achieved × Budgeted rate SFr 97,000 SFr 90,000 SFr 90,000 (16,000,000 × SFr 0.0060) SFr 96,000 ↑ SFr 7,000 U ↑ SFr 6,000 F Spending variance Never a variance Production-volume variance 2 The unfavourable sales-volume variance for direct materials, direct labour and variable indirect costs is due to 20,000 extra copies of the newspaper being produced. The largest individual variance category is for direct materials – comprising a SFr 17,280 U price variance (the actual cost per page of SFr 0.013 exceeds the budgeted SFr 0.012 per page) and a SFr 15,360 U efficiency variance (the 1,280,000 unusable pages × SFr 0.012 budgeted cost.
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 The direct-labour price variance (SFr 1,728 F) is due to the actual labour rate being SFr 29.00 per hour compared to the budgeted SFr 30.00 per hour. The unfavourable variable indirect costs efficiency variance of SFr 5,120 U is due to 1,280,000 extra pages being used (the cost allocation base) over the number budgeted. The spending variance for fixed indirect costs is due to actual costs being SFr 7,000 above the budgeted SFr 90,000. An analysis of the line items in this budget would help assist in determining the causes of this variance. Share with your friends: |
