1.Materials price variance = Actual quantity × (Actual price − Standard price)= 52,400 gallons × ($8.90 per gallon − $8.00 per gallon)= 52,400 gallons × ($0.90 per gallon)= $47,160 UnfavorableMaterials quantity variance:Standard quantity = Actual output × Standard quantity = 17,800 units × 2.6 gallons per unit = 46,280 gallonsMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= (46,380 gallons − 46,280 gallons) × $8.00 per gallon= (100 gallons) × $8.00 per gallon= $800 UnfavorableLabor rate variance = Actual hours × (Actual rate − Standard rate)= 11,080 hours × ($18.90 per hour − $18.50 per hour)= 11,080 hours × ($0.40 per hour)= $4,432 UnfavorableLabor efficiency variance:Standard hours = Actual output × Standard quantity = 17,800 units × 0.60 hours per unit = 10,680 hoursLabor efficiency variance = (Actual hours − Standard hours) × Standard rate= (11,080 hours − 10,680 hours) × $18.50 per hour= (400 hours) × $18.50 per hour= $7,400 UnfavorableBudget variance = Actual fixed overhead − Budgeted fixed overhead= $197,100 − $186,000= $11,100 UnfavorableVolume variance = Budgeted fixed overhead − Fixed overhead applied to work in process= $186,000 − (10,680 hours × $15.50 per hour)= $186,000 − ($165,540)= $20,460 Unfavorable2. & 3.
The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Actual price = 52,400 gallons × $8.90 per gallon = $466,360. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = 52,400 gallons × $8.00 per gallon = $419,200. The materials price variance is $47,160 Unfavorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = 46,380 gallons × $8.00 per gallon = $371,040. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = (17,800 units × 2.6 gallons per unit) × $8.00 per gallon = 46,280 gallons × $8.00 per gallon = $370,240. The difference is the Materials Quantity Variance which is $800 Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = 11,080 hours × $18.90 per hour = $209,412. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = (17,800 units × 0.60 hours per unit) × $18.50 per hour = 10,680 hours × $18.50 per hour = $197,580. The difference consists of the Labor Rate Variance which is $4,432 Unfavorable and the Labor Efficiency Variance which is $7,400 Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is $122,100. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is (17,800 units × 0.60 hours per unit) × $15.50 per hour = 10,680 hours × $15.50 per hour = $165,540. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is $75,000. The difference is the Fixed Overhead (FOH) Budget Variance which is $11,100 Unfavorable and the Fixed Overhead (FOH) Volume Variance which is $20,460 Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = 17,800 units × $41.20 per unit = $733,360. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is 17,700 units × $52.30 per unit = $925,710. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is 17,700 units × $41.20 per unit = $729,240. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by $53,000 to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).