Budgeting and Variance Analysis in Managerial Accounting

This assignment solution covers various aspects of managerial accounting, including static budget variance analysis, calculation of budgeted machine hours, fixed and variable overhead costs, and flexible budget variances. It also includes the computation of total standard manufacturing costs, direct material and labor variances, and manufacturing overhead rate and efficiency variances. The analysis involves calculating price and efficiency variances for direct materials and labor, as well as variable manufacturing overhead efficiency variance and production volume variance, providing a comprehensive overview of cost control and performance evaluation in a manufacturing setting. Desklib offers more solved assignments and resources for students.

Intermediate Managerial Accounting
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Question 2.1
Level 1 static budget variance analayis
Question 2.2
Output units = 888
Machine hours used (Actual) = 1824
Static budget variable manufacturing overhead costs = $71,040
Allocation rate (planned) = 2 machines hours/units
(1) Budgeted planned number of machine hours
= Machine hours per unit / Number of units = 888*2 = 1776 hours
(2) Budgeted fixed manufacturing overhead costs per machine-hour.
= Fixed flexible budget /Budgeted planned number of machine hours = 348096/1776=
$196/machine hours
(3) Budgeted variable manufacturing overhead costs per machine-hour.
= Static budget variable manufacturing overhead costs /Budgeted planned number of machine
hours = 71040/1776 = $40/machine hours
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(4) Budgeted number of machine-hours allowed for actual output achieved.
= Variable flexible budget/ Budgeted variable manufacturing overhead costs per machine-hour.
= 76800/40= 1920 hours
(5) Actual number of output units.
= Budgeted number of machine-hours allowed for actual output achieved/ Allocation rate
(planned) = 1920/2 = 960 units
(6) Actual number of machine-hours used per output unit.
= Machine hours used (Actual)/ Actual number of output units = 1824/960 = 1.9 machine hours
Question 2.3
(a) Flexible budget = 2000 units *0.4* $8 = $6400
(b) Total flexible budget variance = $6400 - $8400 = ($2000) (unfavourable)
(c) Variable overhead spending variance = (Actual hours * standard OH per hours) – Actual
variable overhead cost = (752*$8)-$8400 = ($2384) (unfavourable)
(d) Variable overhead efficiency variance = -$2000 – (-$2384) = $384(Favourable)
(e) Budgeted costs = $49600 – (0.4*$8*1000 units) = $46,400
(f) Actual costs = $46400 - $2000 (Favourable) = $44,400
Question 2.4
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(1) Schedule of total standard manufacturing costs for producing 7800 units in February 2017
Direct material cost = 7800 units * 3 * $5 = $117,000
Direct manufacturing labour = 7800 units * 5 hours * $15 = $585,000
Manufacturing overhead variable cost = 7800 units * $30 =$234,000
Manufacturing overhead fixed cost = 7800 units * $40 =$312,000
Total cost = $117000+$585000+$234000+$312000 =$1,248,000
Fixed manufacturing overhead = 40000 * 8 = $320,000 (lump-sum)
(2) Computation of variance
(a) The direct material price variance by considering the purchases
=(Standard price – Actual price) * Actual quantity
=25000*(5.20-5)= $5000
(b) The direct material efficiency variance
{(standard quantity for actual output)-(Actual quantity)} * standard price
= ((7800*3)-23100)* 5= 1500
(c) Direct manufacturing labour rate variance
= {(standard rate)- Actual hours}* Actual hours
= (15-14.6)*40,100 = $16,040
(d) Direct manufacturing labour efficiency variance
= {(standard hours for actual output)- Actual hours}* Standard rate
= ((5*7800)-40100)*15 = $16,500
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(e) Total manufacturing overhead rate variance
= sum of above variances
= $5000 +$500+$16040+$16500 =$39,400
(f) The variable manufacturing overhead efficiency variance
= {(Standard hours for the actual output) – Actual hours}* Standard rate
= ((30/6 *78000)-40100)*96 = $6,600
(g) Production volume variance = (40000 -39000)*8 =$8000
The above variances come out to be favourable.
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