Chapter 7, 8, 9: Answers Cost Accounting ACCT3395

Chapter 7 14. a. Direct material variance based on quantity purchase: AQ*(AP-SP) =12800*(0.97-0.95) =256(A) Direct material quantity variance: SP*(AQ-SP) = 0.95*(10700-(300*35) = 190(A) b. Price variance: purchasing department Quantity variance: production department c. Reasons for price variance:  The purchasing dep. Doesn’t perform well, so they can’t take the best price for the company.  Because of inflation, all prices of every goods increase, so the price of this increase  The more competitors, the higher the price, because the demand increases and the supply is still stable, so there is a lack of materials, and the suppliers increase the price Reasons for quantity variance ( Unfavourable)  Lack of skilled workers.  Lack of good administration  Lack of good strategy to motivate workers 16. SH.SR : 350*195 3900F AH.SR: 330*195 AH.AR 330*a x We have: 3900+ x = -2500 330*(195-a)=-6400

x= 6400 U a= 214.39

AH.AR= 70750 18. SQ*SP: 6* 0.5* 2400 AQ.SP: 6* x AQ.AP: 20375

800U 12375 U

SQ= 2400*0.5= 1200 AQ*AP= 8000 AQ= (7200+800):6= 1333 c, material price variance: 20375- 8000= 12375 U labour SH.SR: 2400*2*17 3400U: efficiency variance AH.SR: 5000*17 650F AH.AR: 5000*a AH.AR=84350 e, standard price cost: (7200+ 81600): 2400= 37

f, actual price cost: (20375+81600):2400=43.6 20 Case A 800

Case B 750

Case C 240

Case D 1500

Standard hours per unit Standard hours Standard rate per hour Actual hour work Actual labor cost Rate variance

3

0.8

2

3

2400

600

480

4500

7

10.4

9.5

6

2330

675

456

4875

15844

5940

4560

26812.5

466F

1080F

228U

2437.5F

Efficiency variance

490F

780A

228F

2250A

Unit produce

22. 4 approach Variance overhead Actual

budget

applied

$25900

3*8950

3*8800

$950 F

$450U

VOH spending Variance

VOH efficiency variance

500 F: total variance Fixed overhead Actual $ 72600

budget $72000 $600U

applied $ 4,5*4980 $1600 U

FOH spending variance

FOH volume variance 2200 U

b. VOH: FOH:

Actual 25900 72600

budget at actual 3*8950=26850 72000

$98500

budget at standard applied 3*8800=26400 3*8800=26400 72000 8*8800=70400

$98850 $350F

OH spending

$98400

$96800

$450F

1600U

Oh efficiency

Volume

c. Actual VOH: $25900 FOH: $72600

Budget $3*8800=$26400 $72000

$98500

Applied $3*8800=26400 $8*8800=70400

$98400

$96800

$100 U

$1600 U

23. Variance overhead rate: 270000: 60000= 4.5 Fixed overhead rate: 118800: 3300= 36 Actual

budget

applied

$22275

4.5*4900

4.5*4980

225 U

360F

VOH spending Variance

VOH efficiency variance

135 F: total variance Fixed overhead Actual $ 9600

budget $118800:12 $300F

applied $36*240 $1260 U

FOH spending variance

FOH volume variance 960 U

b. Variable Manufacturing Overhead Fixed manufacturing overhead Various account To record actual overhead costs

22275 9600

Working in process Variable manufacturing overhead Fixed manufacturing overhead To apply overhead to work in process

31050

Variable overhead spending variance Variable manufacturing overhead Variable overhead efficiency variance To record variable overhead variances Volume variance Fixed manufacturing overhead Fixed manufacturing spending variance To record fixed overhead variances

225 135

31875

22410 8640

360 1260 960 300

18. g. The first thing we can see here is that the actual cost much more higher than the standard cost. The main reasons for this are some unfavorable variances of materials and labor First, in materials, we can see, the price and the quantity variances are unfavorable. The reasons for price material maybe are inflation, the weakness of purchasing department or the increase of competition, so the more demand is and the stable or the less supply is. This makes the price goes up. In the labor, we can see, in the efficiency, there is the unfavorable variance, this can be caused by the lack of skilled workers and good administration. Although there is a favorable variance in labor rate, this is pretty small when compared with the unfavorable variance in efficiency. This is the consequence of the use of unskilled workers.

Chapter 9 9. a. Variable production cost per unit (75000+50000+37500):150000= 1.0833 b. total contribution: 240000-1.083*90000-45000= 97530 Contribution margin per unit: 97530: 90000= 1.084 c. Income statement Revenue Variable production cost Variable selling and administration expense Closing inventory Total variable cost of goods of sale Total contribution Fixed production overhead Fixed selling and administration cost Net profit

240000 162500 45000 (64980) (142520) 97480 (56250) (50000) (8770)

10. a. total revenue increases: 25+21= 46 b. total cost increases: 21 c. income before tax increase: 25 11. Break even point in unit: 60000: (30-15) + 4000 (unit) Break even point in dolar: 60000: [(30-15):30]= 120000$ 14 Regard minimum price per unit as X Variable cost= 70% price We have: 0.3X..60000= 600000+300000 X=50$ 15. Variable cost per unit: 150+700= 850 a. the number of unit to be breakeven: 130000: (1500-850)= 200 b. the number of unit to earn profit of $195000: (130000+195000): (1500-850)= 500 c. the number of unit to earn profit of 260000: (130000+260000):650= 600 17. a. Profit before tax: 224000 Tax 40% Profit after tax 134400 The number of unit to earn profit before tax of 224000:

(130000+224000): 650= 545 b. Regard the number of unit is X We have: revenue: 1500X Profit after tax 150X profit before tax: 150X: 0.6= 250X The number of unit: X= (130000+250X): 650 X= 325 unit Revenue: 1500*325= 487500 19. Variable cost: 4500000*0.6= 2700000 CM ratio (4500000-2700000):4500000= 0.4 Regard Revenue needed to earn target: X We have: X= (50000*12+0.3*X):0.4 X= 6000000 Annual sales must increase: 6m- 4,5m= 1,5m

c.

22. a. people using the ferry each day: 1450: 0.5= 2900 b. each passenger is charged to be break even: 1800:2900= 0.62 To make profit of 250 each day, each passenger must be charged: (250+1800):2900= 0.71 Fixed cost: 1800*0.8= 1440 Variable cost: 1800-1440= 360 Variable cost per passenger: 360: 2900= 0.124 Passenger volume: 2900* 0.9= 2610 Expected loss= (2610*0.6)- (2610*0.124) – 1440= $197.64 Existing loss: 1800- 1450= 350 The country will be better of 152.36 $ d. regard the step we have to make profit as x ( x belongs to N*) We have: Passenger volume: 2900-2900.0.05x= 2900-145x Price: 0.5+0.2x Sale: (2900-145x)* (0.5+0.2x) Cost: 0.121* (2900-145x) +1440 To make profit: Sale > cost (2900-145x)*(0.5+0.2x)> 0.121*(2900-145x)+ 1440 29x2-525.045x+304.9