Standard Costs and Operating
Performance Measures
Chapter 11
Demonstration Case 3
Usage and Cost Variances
Variable Costs Per
Unit
Standard
Actual
Direct Materials Cost
$16.00
$16.34
Direct Labor Cost
12.00
10.92
Overhead Cost
14.00
14.20
Total
$42.00
41.46
$120,400
$114,000
43,000
44,000
Expected Fixed Cost
Manufacturing
# of Units
Demonstration Case
Material Usage and Cost Variances
Variable Costs Per
Unit
Standard
Actual
Direct Materials Cost
$16.00
$16.34
# board Feet/unit
8 ft
8.6 ft
Cost per bd foot
$2
$1.90
Material Flexible-Budget Variances
Total flexible-budget variance
= Total actual results
– Total flexible-budget planned results
Actual
Results
16.34 x 44,000
$(718,960)
$14,960 Unfavorable
Flexible-budget variances
Flexible
Budget
16.00 x 44,000
$(704,000)
Material Cost and
Volume Variances
Actual Cost
Column
Actual Quantity
Used
×
Actual (fixed) Cost
Variance Dividing
Column
44,000
×
8.6 ft
x
$1.90
$718,960
Flexible Standard Cost
Column
Standard
Actual Quantity
44,000
44,000
Quantity
Used
x
x
×
×
8 ft
Standard (fixed) Cost 8.6 ft Standard (fixed) Cost
x
x
$2/ft
$2/ ft
$704,000
756,800
Cost Variance
$37,960 Favorable
Volume Variance
$52,800 Unfavorable
Total Variance
$14,960 UnFavorable
Demonstration Case
Labor Usage and Cost Variances
Variable Costs Per
Unit
Standard
Actual
Direct Labor Cost
$12.00
$10.92
# hours /unit
1.5 hr
1.4 hrs
Labor cost/hr
$8.00
$7.80
Labor Flexible-Budget Variances
Total flexible-budget variance
= Total actual results
– Total flexible-budget planned results
Actual
Results
10.92 x 44,000
$(480,480)
$47,520 Favorable
Flexible-budget variances
Flexible
Budget
12.00 x 44,000
$(528,000)
Labor Cost and
Volume Variances
Actual Cost
Column
Variance Dividing
Column
Flexible Standard Cost
Column
Standard
Actual Quantity
44,000
44,000
44,000
Quantity
Used
x
×
x
×
×
1.5 hr
1.4 hr Standard (fixed) Cost 1.4 hr Standard (fixed) Cost
x
x
x
$ 8.00
$7.80
$ 8.00
$528,000
$480,480
492,800
Actual Quantity
Used
×
Actual (fixed) Cost
Cost Variance
$12,320 Favorable
Total Variance
$47,520 Favorable
Volume Variance
$35,200 Favorable
Demonstration Case
Variable MFG Overhead Usage
and Cost Variances
Variable Costs Per
Unit
Standard
Actual
Overhead Cost
$14.00
$14.20
Variable MFG Overhead FlexibleBudget Variances
Total flexible-budget variance
= Total actual results
– Total flexible-budget planned results
Actual
Results
14.20 x 44,000
$(624,000)
$8,800 Unfavorable
Flexible-budget variances
Flexible
Budget
14.00 x 44,000
$(616,000)
Demonstration Case
Summary of Usage and Cost
Variances
Variable Costs Per
Standard
Actual
Variance
Unit
Direct Materials Cost
$16.00
$16.34
$14, 960 UF
Direct Labor Cost
12.00
10.92
$ 47,520 F
Overhead Cost
14.00
14.20
$ 8,800 UF
Total
$42.00
41.46
$ 23,760 F
$120,400
$114,000
$ 6,400 F
43,000
44,000
Expected Fixed Cost
Manufacturing
# of Units
Demonstration Case
Fixed Overhead Volume and
SpendingVariances
Variable Costs Per
Standard
Actual
Unit
OVH Cost
$120,400
$114,000
Cost/unit
2.80
2.59
Total Units
43,000
44,000
(114,000/44,000=2.59)
Fixed Overhead Flexible-Budget
Variances
Total flexible-budget variance
= Total actual results
– Total flexible-budget planned results
Actual
Results
2.59 x 44,000
$(114,000) rnd
$6,400 Favorable
Flexible-budget variances
Master
Budget
2.80 x 43,000
$(120,400)
Fixed Overhead Spending and
Volume Variances
Actual Cost
Column
Actual Quantity
Used
×
Actual (fixed) Cost
Master Budget Dividing
Column
44,000
×
2.59
Flexible Standard Cost
Column
Actual
Standard Quantity
43,000
Quantity
Used
x
×
×
Standard (fixed) Cost 2.80 Standard (fixed) Cost
114,000
$123,200
120,400
Spending Variance
$6,400 Favorable
44,000
x
2.80
Volume Variance
$2,800 Favorable
Total Variance
$9,200 Favorable