Chapter 21: Exercises

Exercise 21-1: Management by Exception Data Given: April’s variances with labels F (Favorable) and U (Unfavorable). Only variances of $400 or more are investigated. Solution Steps: 1. Review all variances. 2. Identify any variance of $400 or more and list these for further investigation. Exercise 21-2: Classifying Costs as Fixed or Variable Data Given: List of costs related to bike production. Solution Steps: 1. Determine if each cost varies with the number of bikes produced (Variable) or remains constant regardless of production level (Fixed). o Variable Costs: Typically costs like materials, screws, and direct labor. o Fixed Costs: Usually include rent, salaries of supervisors, property taxes, and depreciation. Exercise 21-3: Preparing Flexible Budgets Data Given: Fixed budget for 7,000 units with details on fixed and variable costs. Solution Steps: 1. Total Variable Cost per Unit: Divide total variable cost by the number of units. 2. Total Fixed Costs: Sum all fixed costs. 3. Flexible Budgets: Calculate budgets for 6,000 and 8,000 units by scaling variable costs and keeping fixed costs constant. Exercise 21-4: Flexible Budget Performance Report Data Given: Budgeted selling price and variable costs per unit; partial flexible budget performance report. Solution Steps: 1. Calculate the actual and flexible budgeted amounts. 2. Compute each variance (Favorable or Unfavorable) based on differences between actual and flexible budgeted amounts. Exercise 21-5 to Exercise 21-6: Preparing Flexible Budget Performance Reports Data Given: Fixed budget and actual results. Solution Steps: 1. Prepare a flexible budget based on actual sales units. 2. Calculate variances by comparing the actual results to the flexible budget amounts, labeling each variance as F or U. Exercise 21-7: Standard Cost Per Unit and Variance Data Given: Standard cost data for a manufactured product. Solution Steps: 1. Standard Cost Card: Calculate standard cost per unit for materials, labor, and overhead. 2. Total Budgeted Cost: Multiply the standard cost per unit by the number of units produced. 3. Total Cost Variance: Compare actual costs with the budgeted amount and indicate if F or U. Exercise 21-8: Standard Cost Per Unit, Total Budgeted and Actual Costs Solution Steps: 1. Prepare the Standard Cost Card. 2. Calculate the Total Budgeted Cost and Total Actual Cost. 3. Compute the Total Cost Variance as the difference between budgeted and actual, and label as F or U. Exercise 21-9 to Exercise 21-12: Direct Materials and Direct Labor Variances Solution Steps: 1. Direct Materials Price Variance: (Actual Price−Standard Price)×Actual Quantity 2. Direct Materials Quantity Variance: (Actual Quantity−Standard Quantity)×Standard Price 3. Direct Labor Rate Variance: (Actual Rate−Standard Rate)×Actual Hours 4. Direct Labor Efficiency Variance: (Actual Hours−Standard Hours)×Standard Rate 5. Label each variance as F or U. Exercise 21-13: Computing and Analyzing Materials Variances Solution Steps: 1. Compute Direct Materials Price and Quantity Variances. 2. Calculate Total Direct Materials Variance. 3. Identify any variances over 5% for further investigation. Exercise 21-14A: Recording Materials Variances Solution Steps: 1. Record the journal entries for direct materials, showing the variances in separate accounts for price and quantity. Exercise 21-15 to Exercise 21-16: Direct Labor Variances Solution Steps: 1. Use the given data to compute rate and efficiency variances for direct labor, applying the formulas from Exercises 21-9 to 21-12. 2. Label each variance as F or U and determine which to investigate further based on thresholds. Exercise 21-17: Computing Standard Overhead Rate and Total Overhead Variance Solution Steps: 1. Standard Overhead Rate: Total Overhead at 80% Capacity 2. Standard Overhead Applied: Multiply the standard overhead rate by the actual activity level. 3. Total Overhead Variance: Compare actual overhead with applied overhead. Exercise 21-18: Volume and Controllable Variances Solution Steps: 1. Calculate the Volume Variance and Controllable Variance based on budgeted and actual activity levels. Exercise 21-19 to Exercise 21-21: Overhead Variances and Volume Variance Solution Steps: 1. Compute Total Overhead Variance, Controllable Variance, and Volume Variance using the actual costs and flexible budget costs. 2. Label each as F or U. Exercise 21-22: Total Overhead Variance Solution Steps: 1. Calculate Total Overhead Variance using provided actual and budgeted costs. Exercise 21-23: Flexible Overhead Budget Solution Steps: 1. Complete flexible budget for different capacity levels, adjusting only variable costs. Exercise 21-24 to Exercise 21-25: Overhead Variance Report Solution Steps: 1. Compute Controllable and Volume Variances. 2. Prepare an Overhead Variance Report at the actual activity level. Exercise 21-26: Computing Sales Variances Solution Steps: 1. Sales Price Variance: (Actual Price−Budgeted Price)×Actual Quantity Sold 2. Sales Volume Variance: (Actual Quantity Sold−Budgeted Quantity)×Budgeted Price 3. Label each as F or U. Exercise 21-27A and Exercise 21-28A: Detailed Overhead Variances Solution Steps: 1. Variable Overhead Spending and Efficiency Variances. 2. Fixed Overhead Spending and Volume Variances. 3. Compute Controllable Variance as the sum of spending and efficiency variances. This guide provides a roadmap for solving each exercise, including which formulas to apply and how to interpret the results. Let me know if you need step-by-step calculations for any specific problem.