PROBLEM 24.

2A
AGRICHEM INDUSTRIES

30 Minutes, Medium

a. Computation of materials price variance (MPV):

MPV =
=
=
=

Actual Quantity Used (Standard Price - Actual Price)

102,500 lbs. ($0.60/lb - $0.57/lb.)
102,500 lbs. $0.03/lb.
$3,075 Favorable

Computation of materials quantity variance (MQV):

MQV =
=
=
=

Standard Price (Standard Quantity - Actual Quantity)

$0.60 [(500 lbs. 200 batches) - 102,500 lbs.]
$0.60 -2,500 lbs.
-$1,500 (or $1,500 Unfavorable)

Computation of labor rate variance (LRV):

LRV =
=
=
=

Actual Hours (Standard Hourly Rate - Actual Hourly Rate)

4,750 ($7.00/hr. - $6.80/hr.)
4,750 $0.20/hr.
$950 Favorable

Computation of labor efficiency variance (LEV):

LEV =
=
=
=

Standard Hourly Rate (Standard Hours - Actual Hours)

$7.00/hr. [(25 hrs. 200 batches) - 4,750 hrs.]
$7.00/hr. 250 hrs.
$1,750 Favorable

Overhead variances are computed on the following page.

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P24.2A

PROBLEM 24.2A
AGRICHEM INDUSTRIES (concluded)

Computation of overhead spending variance:

Overhead budgeted for 200 batches:
Fixed
Variable (200 batches $25 per batch)
Total budgeted overhead
Less: Actual overhead for the month
Overhead spending variance (favorable)

50,000
5,000
$
$

Computation of volume variance:

Overhead applied at standard cost ($225 200 batches)
Less: Budgeted overhead (above)
Volume variance (unfavorable)

$
$

55,000
54,525
475

45,000
55,000
(10,000)

b.
General Journal

Jan. 31 Work in Process Inventory (at standard)

Materials Quantity Variance
Materials Price Variance
Materials Inventory (actual)
To record direct materials used in January.
Standard cost (200 batches $300) = $60,000
Actual cost = $58,425

60,000
1,500
3,075
58,425

31 Work in Process Inventory (at standard)

Labor Rate Variance
Labor Efficiency Variance
Direct Labor (actual)
To record direct labor cost applicable to January
production:
Standard cost (200 batches $175) = $35,000
Actual cost = $32,300

35,000

31 Work in Process Inventory (at standard)

Volume Variance
Overhead Spending Variance
Manufacturing Overhead (actual)
To apply overhead to work in process, using standard
unit cost:
Standard cost (200 batches $225) = $45,000
Actual cost = $54,525

45,000
10,000

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P24.2A (p.2)

950
1,750
32,300

475
54,525

PROBLEM 24.4A
SVEN ENTERPRISES

45 Minutes, Strong

a.

Materials Price Variance = Actual Quantity Used (Standard Price - Actual Price)
= 148,450 pounds ($4.20 - $4.00*)
= $29,690 Favorable
*Actual Price per Pound = $593,800/148,450 pounds = 4.00/pound
Materials Quantity Variance

= Standard Price (Standard Quantity - Actual Quantity)

= $4.20 per pound (149,940 pounds* - 148,450 pounds)
= $6,258 Favorable

*Standard Quantity Allowed = 147 batches 1,020 pounds/batch = 149,940 pounds

b.

Labor Rate Variance = Actual Labor Hours (Standard Rate - Actual Rate)
= 2,200 hours ($8.50 - $8.00*)
= $1,100 Favorable
*Actual Rate per Hour = $17,600/2,200 hours = $8.00/hour
Labor Efficiency Variance = Standard Hourly Rate (Standard Hours - Actual Hours)
= $8.50 per hour (2,058 hours* - 2,200 hours)
= -$1,207 (or $1,207 Unfavorable)
*Standard Hours Allowed = 147 batches 14 hours/batch = 2,058 hours

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P24.4A

Problem 24.4A
SVEN ENTERPRISES (continued)
c. Overhead variances:
Actual Overhead
Costs Incurred

Standard Overhead
Overhead
Costs Allowed
Costs Applied
Fixed $2,800
$29/batch 147 batches =
Variable
1,323* $4,263
$4,123

Fixed
$2,450
Variable 1,175
$3,625
$498 Favorable
Spending Variance

$140 Favorable
Volume Variance

*Standard Variable Overhead Allowed = $9.00/batch 147 batches = $1,323

d. Entry to charge materials to production:
Work in Process Inventory (at standard cost)
629,748 *
Materials Quantity Variance (favorable)
Materials Price Variance (favorable)
Direct Materials Inventory (at actual cost)
To record the cost of direct materials charged to production.

6,258
29,690
593,800

*147 actual batches 1,020 pounds allowed per batch $4.20 per pound = $629,748
e. Entry to charge direct labor to production:
Work in Process Inventory (at standard cost)
17,493 *
Labor Efficiency Variance (unfavorable)
1,207
Labor Rate Variance (favorable)
Direct Labor (at actual cost)
To record the cost of direct labor charged to production.

1,100
17,600

*147 actual batches 14 hours allowed per batch $8.50 per hour = $17,493
f. Entry to charge overhead to production:
Work in Process Inventory (at standard cost)
4,263
Overhead Spending Variance (favorable)
Overhead Volume Variance (favorable) ..
Manufacturing Overhead (at actual cost)
To apply overhead to production.

The McGraw-Hill Companies, Inc., 2012

P24.4A (p.2)

498
140
3,625

PROBLEM 24.4A
SVEN ENTERPRISES (concluded)
g. Entry to transfer the 147 batches of puppy meal produced in April to finished goods:
Finished Goods Inventory (at standard cost)
Work in Process Inventory (at standard cost)
To transfer 147 batches of puppy meal to finished goods in April.

651,504
651,504*

*The $651,504 figure equals the total direct materials, direct labor, and manufacturing
overhead charged to production at standard cost during April ($629,748 + $17,493 +
$4,263).
h. Entry to close overapplied overhead to cost of goods sold:
Overhead Spending Variance (favorable)
Overhead Volume Variance (favorable)
Cost of Goods Sold
To close overhead variances to Cost of Goods Sold.

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P24.4A (p.3)

498
140
638

PROBLEM 24.8A
RIPLEY COPRORATION

60 Minutes, Strong

a. Based on the journal entry to charge direct materials costs to work in process, the actual
quantity of material purchased and used during June is determined as follows:
Materials Price Variance
= Actual Quantity Used (Standard Price - Actual Price)
$8,200 = Actual Quantity Used ($6 - $5)
Thus, the actual quantity of material used during June was 8,200 pounds.
b. Based on the journal entry to charge direct material costs to work in process, the standard
quantity of material allowed for the actual level of output achieved in June is determined as
follows:
Materials Quantity Variance = Standard Price (Standard Quantity - Actual Quantity)
-$1,200 = $6 per pound (Standard Quantity - 8,200 pounds*)
-$1,200 = $6 (Standard Quantity) - $49,200
$48,000 = $6 (Standard Quantity)
Thus, the standard quantity allowed = $48,000/$6 per pound = 8,000 pounds.
*The 8,200 pounds figure was calculated in part a above.
c. Based on the journal entry to charge direct labor costs to work in process, the average per hour
labor cost incurred in June is determined as follows:
Labor Rate Variance
-$950
-$950
-$86,450

=
=
=
=

Actual Labor Hours (Standard Rate - Actual Rate)

9,500 hours ($9 - Actual Rate)
$85,500 - 9,500 (Actual Rate)
9,500 (Actual Rate)

Thus, the actual hourly rate incurred = -$86,450 -9,500 hours = $9.10 per hour.
d. Based on the journal entry to charge direct labor costs to work in process, the standard direct
labor hours allowed during June is determined as follows:
Labor Efficiency Variance = Standard Hourly Rate (Standard Hours - Actual Hours)
-$4,500 = $9 per hour (Standard Hours - 9,500 hours)
-$4,500 = $9 (Standard Hours) $85,500
$81,000 = $9 (Standard Hours)
Thus, the standard hours allowed = $81,000/$9 per hour = 9,000 hours.

The McGraw-Hill Companies, Inc., 2012

P24.8A

Problem 24.8A
RILEY CORPORATION (concluded)
e. Based on the journal entry to charge overhead costs to work in process, the following
relationships exist:
Actual Overhead
Costs Incurred
$22,000

Standard Overhead
Costs Allowed
?

$2,000 Unfavorable
Spending Variance

Overhead
Costs Applied
$25,000
$5,000 Favorable
Volume Variance

Thus, standard overhead costs allowed for in June of $20,000 can be computed as follows:
$22,000 - $2,000 = $20,000, or $25,000 - $5,000 = $20,000.
f. Finished Goods Inventory (at standard cost)
Work in Process Inventory (at standard cost)
To transfer cost of completed units to finished goods.

154,000
154,000*

*The $154,000 figure equals the total direct materials, direct labor, and manufacturing
overhead charged to production at standard cost during June ($48,000 + $81,000 + $25,000).

g. Overhead Volume Variance (favorable)

5,000
Materials Price Variance (favorable)
8,200
Materials Quantity Variance (unfavorable)
Direct Labor Rate Variance (unfavorable)
Direct Labor Efficiency Variance (unfavorable)
Overhead Spending Variance (unfavorable)
Cost of Goods Sold
To close the cost variance accounts.

1,200
950
4,500
2,000
4,550

h. Given that Ripleys overhead volume variance was favorable, its actual production during
June must have exceeded normal output.

The McGraw-Hill Companies, Inc., 2012

P24.8A (p.2)

PROBLEM 24.2B
DYELOT INDUSTRIES

30 Minutes, Medium

a. Computation of materials price variance (MPV):

MPV =
=
=
=

Actual Quantity Used (Standard Price - Actual Price)

410,000 lbs. ($0.80/lb - $0.75/lb.)
410,000 lbs. $0.05/lb.
$20,500 Favorable

Computation of materials quantity variance (MQV):

MQV =
=
=
=

Standard Price (Standard Quantity - Actual Quantity)

$0.80 [(1,000 lbs. 400 batches) - 410,000 lbs.]
$0.80 -10,000 lbs.
-$8,000 (or $8,000 Unfavorable)

Computation of labor rate variance (LRV):

LRV =
=
=
=

Actual Hours (Standard Hourly Rate - Actual Hourly Rate)

7,950 ($8.00/hr. - $7.80/hr.)
7,950 $0.20/hr.
$1,590 Favorable

Computation of labor efficiency variance (LEV):

LEV =
=
=
=

Standard Hourly Rate (Standard Hours - Actual Hours)

$8.00/hr. [(20 hrs. 400 batches) - 7,950 hrs.]
$8.00/hr. 50 hrs.
$400 Favorable

Overhead variances are computed on the following page.

The McGraw-Hill Companies, Inc., 2012

P24.2B

PROBLEM 24.2B
DYELOT INDUSTRIES (concluded)

Computation of overhead spending variance:

Overhead budgeted for 400 batches:
Fixed
Variable (400 batches $20 per batch)
Total budgeted overhead
Less: Actual overhead for the month
Overhead spending variance (favorable)

150,000
8,000
$
$

Computation of volume variance:

Overhead applied at standard cost
($320 400 batches)
Budgeted overhead (above)
Volume variance (unfavorable)

$
$

158,000
150,490
7,510

128,000
158,000
(30,000)

b.
General Journal

Jan. 31 Work in Process Inventory (at standard)

Materials Quantity Variance
Materials Price Variance
Materials Inventory (actual)
To record direct materials used in January.
Standard cost (400 batches $800) = $320,000
Actual cost = $307,500

320,000
8,000

31 Work in Process Inventory (at standard)

Labor Rate Variance
Labor Efficiency Variance
Direct Labor (actual)
To record direct labor cost applicable to January
production:
Standard cost (400 batches $160) = $64,000
Actual cost = $62,010

64,000

31 Work in Process Inventory (at standard)

Volume Variance
Overhead Spending Variance
Manufacturing Overhead (actual)
To apply overhead to work in process, using
standard unit cost:
Standard cost (400 batches $320) = $128,000
Actual cost = $150,490

128,000
30,000

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P24.2B (p.2)

20,500
307,500

1,590
400
62,010

7,510
150,490

PROBLEM 24.4B
HANS ENTERPRISES

45 Minutes, Strong

a.

Materials Price Variance = Actual Quantity Used (Standard Price - Actual Price)
= 170,000 pounds ($5.00 - $4.80*)
= $34,000 Favorable
*Actual Price per Pound = $816,000/170,000 pounds = $4.80/pound
Materials Quantity Variance

= Standard Price (Standard Quantity - Actual

Quantity)
= $5.00 per pound (164,000 pounds* - 170,000 pounds)
= $30,000 Unfavorable

*Standard Quantity Allowed = 160 batches 1,025 pounds/batch = 164,000 pounds

b.

Labor Rate Variance = Actual Labor Hours (Standard Rate - Actual Rate)
= 2,500 hours ($8.25 - $8.00*)
= $625 Favorable
*Actual Rate per Hour = $20,000/2,500 hours = $8.00/hour
Labor Efficiency Variance = Standard Hourly Rate (Standard Hours - Actual Hours)
= $8.25 per hour (2,400 hours* - 2,500 hours)
= -$825 Unfavorable
*Standard Hours Allowed = 160 batches 15 hours/batch = 2,400 hours

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P24.4B

PROBLEM 24.4B
HANS ENTERPRISES (continued)
c. Overhead variances:
Actual Overhead
Costs Incurred
Fixed
Variable

Standard Overhead
Overhead
Costs Allowed
Costs Applied
Fixed $3,300
Variable 1,600
$32/batch 160 batches = $5,120
$4,900

$3,100
1,100
$4,200
$700 Favorable
Spending Variance

$220 Favorable
Volume Variance

*Standard Variable Overhead Allowed = $10.00/batch 160 batches = $1,600

d. Entry to charge materials to production:
Work in Process Inventory (at standard cost)
820,000 *
Materials Quantity Variance (unfavorable)
30,000
Material Price Variance (favorable)
Direct Materials Inventory (at actual cost)
To record the cost of direct materials charged to production.

34,000
816,000

*160 actual batches 1,025 pounds allowed per batch $5.00 per pound = $820,000
e. Entry to charge direct labor to production:
Work in Process Inventory (at standard cost)
19,800 *
Labor Efficiency Variance (unfavorable)
825
Labor Rate Variance (favorable)
Direct Labor (at actual cost)
To record the cost of direct labor charged to production.

625
20,000

*160 actual batches 15 hours allowed per batch $8.25 per hour = $19,800
f. Entry to charge overhead to production:
Work in Process Inventory (at standard cost)
5,120
Overhead Spending Variance (favorable)
Overhead Volume Variance (favorable)
Manufacturing Overhead (at actual cost)
To apply overhead to production.

The McGraw-Hill Companies, Inc., 2012

P24.4B (p.2)

700
220
4,200

PROBLEM 24.4B
HANS ENTERPRISES (concluded)
g. Entry to transfer the 160 batches of crow bait produced in June to finished goods:
Finished Goods Inventory (at standard cost)
844,920
Work in Process Inventory (at standard cost) .
To transfer 160 batches of crow bait to finished goods in June.

844,920*

*The $844,920 figure equals the total direct materials, direct labor, and manufacturing
overhead charged to production at standard cost during June ($820,000 + $19,800 + $5,120).

h. Entry to close overapplied overhead to cost of goods sold:

Overhead Spending Variance (favorable)
Overhead Volume Variance (favorable)
Cost of Goods Sold
To close overhead variances to Cost of Goods Sold.

The McGraw-Hill Companies, Inc., 2012

P24.4B (p.3)

700
220
920

PROBLEM 24.8B
FODING CORPORATION

60 Minutes, Strong

a. Based on the journal entry to charge direct materials costs to work in process, the actual
quantity of material purchased and used during May is determined as follows:
Materials Price = Actual Quantity Used (Standard Price - Actual Price)
Variance
$1,500 = Actual Quantity Used ($7 - $6)
Thus, the actual quantity of material used during May was 1,500 pounds.
b. Based on the journal entry to charge direct material costs to work in process, the standard
quantity of material allowed for the actual level of output achieved in May is determined as
follows:
Materials Quantity Variance = Standard Price (Standard Quantity - Actual Quantity)
-$1,000 = $7 per pound (Standard Quantity - 1,500 pounds*)
-$1,000 = $7 (Standard Quantity) - $10,500
$9,500 = $7 (Standard Quantity)
Thus, the standard quantity allowed = 9,500 7 = 1,357 pounds.
*The 1,500 pounds figure was calculated in part a above.
c. Based on the journal entry to charge direct labor costs to work in process, the average per
hour labor cost incurred in May is determined as follows:
Labor Rate Variance
-$8,000
-$8,000
-$48,000

=
=
=
=

Actual Labor Hours (Standard Rate - Actual Rate)

4,000 hours ($10 - Actual Rate)
$40,000 - 4,000 (Actual Rate)
-4,000 (Actual Rate)

Thus, the actual hourly rate incurred = -$48,000 -4,000 = $12 per hour.
d. Based on the journal entry to charge direct labor costs to work in process, the standard direct
labor hours allowed during May is determined as follows:
Labor Efficiency Variance = Standard Hourly Rate (Standard Hours - Actual Hours)
-$5,000 = $10 per hour (Standard Hours - 4,000 hours)
-$5,000 = $10 (Standard Hours) - $40,000
$35,000 = $10 (Standard Hours)
Thus, the standard hours allowed = $35,000 $10 = 3,500 hours.

The McGraw-Hill Companies, Inc., 2012

P24.8B

PROBLEM 24.8B
FODING CORPORATION (concluded)
e. Based on the journal entry to charge overhead costs to work in process, the following
relationships exist:
Actual Overhead
Costs Incurred
$25,000
$3,000 Unfavorable
Spending Variance

Standard Overhead
Costs Allowed
?

Overhead
Costs Applied
$28,000
$6,000 Favorable
Volume Variance

Thus, standard overhead costs allowed for in May of $22,000 can be computed as follows:
$25,000 - $3,000 = $22,000, or $28,000 - $6,000 = $22,000.
f. Finished Goods Inventory (at standard cost)
72,500
Work in Process Inventory (at standard cost)
To transfer cost of completed units to finished goods.

72,500*

*The $72,500 figure equals the total direct materials, direct labor, and manufacturing
overhead charged to production at standard cost during May ($9,500 + $35,000 + $28,000).

g. Cost of Goods Sold

9,500
Overhead Volume Variance (favorable)
6,000
Materials Price Variance (favorable)
1,500
Materials Quantity Variance (unfavorable)
Direct Labor Rate Variance (unfavorable)
Direct Labor Efficiency Variance (unfavorable)
Overhead Spending Variance (unfavorable)
To close the cost variance accounts.

1,000
8,000
5,000
3,000

h. Given that Fodings overhead volume variance was favorable, its actual production during
May must have exceeded normal output.

The McGraw-Hill Companies, Inc., 2012

P24.8B (p.2)