Management Accounting in Australia - Solutions
Chapter 8 Responsibility Accounting
Chapter Review Solutions
1
F
V
Actual
220,500
170,940
$391,440
Flexible Budget
Fixed
216,000
Variable 21,000 x $8.10
170,100
$386,100
$ 5,340 Unfavourable
Overhead Spending Variance
Applied
21,000 x $18.90
396,900
$ 10,800 Favourable
Overhead Capacity Variance
$5,460 Over applied Total Variance
2.
(a)
Variable Overhead
Fixed Overhead
Actual
F
72,000
V 160,200
$232,200
=
=
180,000
200,000
=
70,000
200,000
=
$0.90
$0.35
$1.25
Flexible Budget
Fixed
70,000
Variable 180,000 x $0.90
162,000
$232,000
$ 200 UnF
Spending Variance
Applied
180,000 x $1.25
225,000
$ 7,000 UF
Capacity Variance
$ 7,200 Underapplied Total Variance
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Chapter 8 Responsibility Accounting
Normal capacity
3.
(a)
50,000 maintenance labour hours
The predetermined overhead rate:
Total Overhead Recovery Rate
=
Total Budgeted Overhead
Budgeted Level of Activity
Variable Overhead Recovery Rate
Fixed Overhead Recovery Rate
(b)
=
[ $50,000 + ( $2 x 50,000 ) ] / 50,000
$ 3.00 per maintenance labour hour
=
Total Budgeted Variable Overhead
Budgeted Level of Activity
=
=
$ 100,000 / 50,000
$ 2.00 per hour
=
Total Budgeted Fixed Overhead
Budgeted Level of Activity
=
=
Amount of Under/Overapplied Overhead:
$ 50,000 / 50,000
$ 1.00 per hour
Actual Overhead Incurred
=
Applied Overhead = $ 3.00 x 54,000 =
Overapplied Overhead
=
$ 161,000
$ 162,000
$ 1,000
The overapplied overhead of $1,000 is a favourable variance which may be further broken
down into 2 separate variances titled:
•
•
Spending Variance
Capacity Variance
using the following schedule.
Actual Factory Overhead
Incurred
$161,000
Flexible Budget based on Actual hours
worked
Actual Hours Worked x Total
Overhead rate per hour
Variable = 54,000 x $2.00 = $108,000
Fixed
= $ 50,000
54,000 x $ 3.00
$158,000
Overhead Spending Variance $3,000 U
Overhead Capacity Variance $4,000 F
Under/Over Applied Overhead = $1,000 F
115
$162,000
Management Accounting in Australia - Solutions
4.
(a)
Budgeted direct labour hours
Labour hours per unit
Budgeted production
=
=
=
140,000
2
70,000 units
(b)
Indirect cost recovery rate
=
Total budgeted indirect costs
Budgeted level of activity
( 2 x 70,000 ) + ( 4 x 70,000 )
70,000
$6 per unit
=
=
(c)
Amount of Under / Over Applied Overhead :
Actual overhead incurred
$370,000
Applied overhead 6 x 60,000
$360,000
Underapplied overhead
$ 10,000
(d)
Actual Factory Overhead
Incurred
Flexible Budget based on Actual hours
worked
Variable
Fixed
=
=
370,000
Actual Hours Worked x Total
Overhead rate per hour
120,000 x 3
$ 240,000
$ 140,000
$380,000
Overhead Spending Variance 10,000 F
360,000
Overhead Capacity Variance 20,000 U
Under/Over Applied Overhead = 10,000 U
5.
High
Analysis:
Low High
Low
Variable Rate =
$3.00 per unit ($48,000/16,000)
Fixed Cost
Total Cost - Variable Cost (production)
$220,000 - $3 (40,000)
$100,000
=
=
=
$
268,000
40,000
16,000
220,000
48,000
Flexible Budget Based
on Actual Hours
Actual
Fixed
Variable
Units
56,000
$101,000
152,000
$253,000
Fixed
Variable
$100,000
$150,000
$250,000
$3,000 Unfavourable Overhead Spending Variance
116
(50,000 x $3.00)
Chapter 8 Responsibility Accounting
6.
Application Rate:
Total Budgeted Overhead Per Unit
=
Budgeted Factory Overhead
Budgeted Machine Hours
=
Variable Rate =
$ 480,000
= $ 1.20 Per Mach Hr.
400,000 Mach Hrs.
Budgeted Variable Overhead
Budgeted Direct Labour Hours
Actual
=
$300,000
400,000 Mach Hs.
Flexible Budget based
on Actual Hours
Fixed
Variable
$442,000
$180,000
$285,000
$465,000
$23,000 favourable
Overhead Spending Variance
=$0.75 P/ M.Hr.
Actual Hours x Standard
Budgeted Rate
380,000 x $ 1.20
(380,000 x $ 0.75 )
$456,000
$9,000 unfavourable
Overhead Capacity Variance
$14,000 Overapplied
7.
Application Rate:
Total Budgeted Overhead Per Unit
=
Budgeted Factory Overhead
Budgeted Direct Labour Hours
=
$ 81,000
= $ 2.70 Per D.L.H.
30,000 D.L.H.
Variable Rate: = $ 1.80 ( 2/3 x $ 2.70 )
Budgeted Fixed Cost = $ 27,000 ( 1/3 x $ 81,000 )
Actual
Flexible Budget based
on Actual Hours
Fixed
Variable
$27,000
$48,600
$75,600
$79,000
$3,400 unfavourable
Overhead Spending Variance
Actual Hours x Standard
Budgeted Rate
27,000 x $ 2.70
( 27,000 x $ 1.80 )
$72,900
$2,700 unfavourable
Overhead Capacity Variance
$6,100 Underapplied
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Management Accounting in Australia - Solutions
8.
Plant - wide recovery rate
66.67 % of D.L.C. ( $ 80,000 / $ 120,000 )
Departmental recovery rate
X
Y
Z
(a)
25.00 % of D.L.C. ( $ 10,000 / $ 40,000 )
200 % of D.L.C. ( $ 40,000 / $ 20,000 )
50.00 % of D.L.H. ( $ 30,000 / $ 60,000 )
i
Job 36 R.M.C. $ 1,500
L.C.
630
F.O.A.
420 ( $ 630 D.L.C. x $0.6667 )
$ 2,550
ii
Job 36 R.M.C. $ 1,500
L.C.
630
F.O.A.
550 ( $200 x $0.25 + $190 x $2.00 + $240 x $0.50 )
$ 2,680
( b ) Application Rate:
Total Budgeted Overhead Per Unit
=
Budgeted Factory Overhead
Budgeted Direct Labour Hours
=
Variable Rate: =
$ 36,000
60,000 D.L.H.
Budgeted Variable Overhead
Budgeted Direct Labour Hours
Actual
=
Flexible Budget based
on Actual Hours
Fixed
Variable
$33,800
$6,000
$27,000
$33,000
$800 unfavourable
Overhead Spending Variance
= $ 0.60 Per D.L.H.
$ 30,000
= $ 0.50 Per D.L.H.
60,000 D.L.H.
Actual Hours x Total Overhead
Rate per hour
54,000 x $ 0.60
(54,000 x $ 0.50 )
$32,400
$600 unfavourable
Overhead Capacity Variance
$1,400 Underapplied
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Chapter 8 Responsibility Accounting
9.
Variable Cost
Fixed Cost
Total Cost
Variable Rate = $ 0.70 per unit
Actual
Fixed
Variable
$ 126,400
$ 50,200
$ 176,600
Normal Capacity
80,000 Mach Hrs
$ 56,000
128,000
$ 184,000
Expected Capacity
64,000 Mach hrs
$ 44,800
128,000
$ 172,800
$ 2.30
$ 2.70
( $ 44,800 / 64,000 units )
Flexible Budget based
on Actual Mach. Hours
Fixed
Variable
$ 128,000
$ 50,400
$ 178,400
$1,800 favourable
Overhead Spending Variance
Actual Hours x Standard
Budgeted Rate
72,000 x $ 2.30
(72,000 x $ 0.70)
$ 165,600
$12,800 unfavourable
Overhead Capacity Variance
$11,000 Underapplied
Actual
Fixed
Variable
$ 126,400
$ 50,200
$ 176,600
Flexible Budget based
on Actual Mach. Hours
Fixed
Variable
$ 128,000
$ 50,400
$ 178,400
$1,800 favourable
Overhead Spending Variance
Actual Hours x Standard
Budgeted Rate
72,000 x $ 2.70
( 72,000 x $ 0.70 )
$ 194,400
$16,000 favourable
Overhead Capacity Variance
$17,800 Overapplied
119
Management Accounting in Australia - Solutions
10.
(a)
Predetermined overhead rate =
$350,000
20,000
= $17.50 per DLH
GENERAL JOURNAL
May 31
Work in Process
Factory Overhead Control/Applied
29,750
29,750
Overhead applied $17.50 x 1,700 DLH
(b)
Actual O/h
Flexible
Budget
@19,500 DLH
Applied O/h
F $202,490
F: $200,000
$17.50x19,500
V 145-080
$347,570
*V: 146,250
$346,250
$341,250
Spending Variance
$1,320 unfavourable
* Variable flexible budget =
11.
(a)
Capacity Variance
$5,000 unfavourable
$150,000
20,000
x 19,500 DLH
Predetermined overhead rate = 69,000
6,000
= $11.50 per DLHr
(b)
Total factory overhead applied $11.50 x 6,100
$ 70,150
(c)
Actual
Flexible Budget
Fixed
Variable
$5.00 x 6,100 units
$72,000
$ 2,500 Unfavourable
Overhead Spending Variance
39,000
30,500
$69,500
70,150
$ 650 Favourable
Overhead Capacity Variance
$ 1,850 Under applied Total Variance
120
Applied
6,100 x $11.50
Chapter 8 Responsibility Accounting
12.
(a)
Predetermined overhead rate = 183,000
30,000
=
(b)
Total factory overhead applied $ 6.10 x 29,000
$ 6.10 per unit
$176,900
(c)
Actual
Flexible Budget
Fixed
Variable
$2.80 x 29,000 units
$175,000
$ 5,200 Favourable
Overhead Spending Variance
99,000
81,200
$180,200
Applied
29,000 x $ 6.10
176,900
$ 3,300 Unfavourable
Overhead Capacity Variance
$ 1,900 Over applied Total Variance
13.
(a)
Predetermined overhead rate = 72,000
15,000
=
(b)
Total factory overhead incurred
Total factory overhead applied $4.80 x 13,500
Under Applied factory overhead
$4.80 per unit
$ 70,300
64,800
5,500
(c)
F
V
Actual
45,200
27,800
$70,300
Flexible Budget
Fixed
45,000
Variable 27,000/15,000 x 13,500 units
24,300
$69,300
$ 1,000 Unfavourable
Overhead Spending Variance
64,800
$ 4,500 unfavourable
Overhead Capacity Variance
$5,500 Under applied Total Variance
121
Applied
13,500 x $4.80