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



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.

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